Lloyds' PPI Mis-Selling Compensation Bill Nears £10 Billion

Lloyds' PPI Mis-Selling Bill Nears £10 BILLION
LONDON, ENGLAND - SEPTEMBER 17: A customer uses a cash machine at Lloyd's Bank branch on September 17, 2013 in London, England. The government has sold 6% of it's share in the Lloyds Banking Group. The tax payer rescued the bank with an injection of £20.5 billion during the 2008 financial crisis. (Photo by Peter Macdiarmid/Getty Images)
LONDON, ENGLAND - SEPTEMBER 17: A customer uses a cash machine at Lloyd's Bank branch on September 17, 2013 in London, England. The government has sold 6% of it's share in the Lloyds Banking Group. The tax payer rescued the bank with an injection of £20.5 billion during the 2008 financial crisis. (Photo by Peter Macdiarmid/Getty Images)
Peter Macdiarmid via Getty Images

Lloyds Banking Group today set aside another £1.8 billion to cover compensation for the mis-selling of payment protection insurance.

Despite the latest provision, which takes the running total for the bank to nearly £10 billion, Lloyds said it still expects to make a small profit for 2013.

It also revealed that it expects to resume dividend payments to shareholders in the second half of this year and that preparations for the possible future sale of shares to the public were under way.

The bank last paid a dividend after it published its half-year results in 2008, just prior to it requiring a £20 billion rescue by the taxpayer.

In September, the Government began the process of selling down the 39% shareholding by offloading a 6% stake to institutional investors.

Chief executive Antonio Horta-Osorio said: "We expect to apply in the second half of 2014 to restart dividend payments and to deliver progressive and sustainable payments to shareholders thereafter.

"This will be another important step in our journey to rebuild trust and confidence in our group."

The further PPI provision brings the total amount set aside in 2013 to £3 billion, despite a reduction in average monthly complaint volumes to around 37,000 in the final quarter of the year.

Its latest customer surveys suggest that the Halifax and Bank of Scotland owner can still expect another 550,000 complaints on PPI.

The bank has also made a further provision of £130 million relating to the sale of interest rate hedging products to small and medium-sized businesses, bringing the total amount set aside to £530 million.

As well as a small statutory profit, Lloyds said it expects to beat City expectations by posting an underlying profit of £6.2 billion for 2013.

The bank has been a grateful beneficiary of the Government's Help to Buy scheme for house-buyers, as well as the Funding for Lending initiative, as mortgage borrowing has taken off.

Shares were more than 3% lower as some analysts had been expecting dividends to be reinstated earlier than today's guidance.

The payout will need to be approved by the Prudential Regulatory Authority in the second half of this year and will be at a "modest" level, Lloyds said.

The bank then plans to move to a dividend payout ratio of at least 50% of sustainable earnings in the medium term.

Horta-Osorio said today's update reflected efforts made over the last three years to reshape, simplify and strengthen the business.

He described the return of dividend payments as an "important step" in the bank's efforts to rebuild trust and confidence in group.

The public sale of shares in Lloyds is part of a drive to return the bank to private ownership by next year, boosted by the success of the recent privatisation of Royal Mail.

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