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Lloyds boss hits out at 'fraudulent' PPI compensation claims Lloyds boss hits out at 'fraudulent' PPI compensation claims
(40 minutes later)
António Horta-Osório, chief executive of Lloyds Banking Group, hit out against fraudulent claims for payment protection insurance compensation on Tuesday as the bailed out bank increased its provision for mis-selling this controversial product by 12% to £3.6bn.António Horta-Osório, chief executive of Lloyds Banking Group, hit out against fraudulent claims for payment protection insurance compensation on Tuesday as the bailed out bank increased its provision for mis-selling this controversial product by 12% to £3.6bn.
He described the £375m addition provision for PPI as "minor adjustment" when asked if it would require the bank to pursue any additional clawback of bonuses from former and current directors. Some £1.5m was clawed back following the £3.2bn provision taken last year. He described the £375m addition provision for PPI as a "minor adjustment" when asked if it would require the bank to pursue any additional clawback of bonuses from former and current directors. Some £1.5m was clawed back following the £3.2bn provision taken last year.
But Horta-Osório criticised the claims management firms that submit compensation forms for customers. He said 25% of the claims submitted by these firms were from customers who did not have products with the banks against which claims were being made.But Horta-Osório criticised the claims management firms that submit compensation forms for customers. He said 25% of the claims submitted by these firms were from customers who did not have products with the banks against which claims were being made.
"We have to stop this," Horta-Osório said. "It's fraud"."We have to stop this," Horta-Osório said. "It's fraud".
Despite the extra PPI provision, which comes after Barclays added £300m to its £1bn provision last week, Lloyds reported a pre-tax profit of £288m in the first quarter. A year ago, the PPI provision pushed Lloyds into a £3.4bn loss.Despite the extra PPI provision, which comes after Barclays added £300m to its £1bn provision last week, Lloyds reported a pre-tax profit of £288m in the first quarter. A year ago, the PPI provision pushed Lloyds into a £3.4bn loss.
Horta-Osório ordered the provision within weeks of taking the helm of Lloyds in March last year and on Tuesday described the debacle over PPI as "unacceptable". He said that the culture of banking needed to change, adding endowments and interest swaps sold to small business customers as further proof that a cultural shift is needed. Horta-Osório ordered the provision within weeks of taking the helm of Lloyds in March last year and on Tuesday described the debacle over PPI as "unacceptable". He said the culture of banking needed to change, adding endowments and interest swaps sold to small business customers as further proof that a cultural shift is needed.
Hired from the UK arm of Spanish bank Santander to replace Eric Daniels, Horta-Osório was careful not to rule out further increases to the PPI provision. "The group continues to monitor the position closely and will re-evaluate the assumptions underlying its analysis as more information becomes available. There is inherent uncertainty in making assumptions and the ultimate financial impact may differ from the amount provided," the bank said.Hired from the UK arm of Spanish bank Santander to replace Eric Daniels, Horta-Osório was careful not to rule out further increases to the PPI provision. "The group continues to monitor the position closely and will re-evaluate the assumptions underlying its analysis as more information becomes available. There is inherent uncertainty in making assumptions and the ultimate financial impact may differ from the amount provided," the bank said.
Cost cutting balances falling incomeCost cutting balances falling income
With the integration of HBOS - rescued by Lloyds during the 2008 banking crisis - now complete, Horta-Osório also targeted 15,000 job cuts on top of the 30,000 already axed through the takeover. Some 3,290 job cuts were announced in the first quarter taking the total to 5,388 since the start of the cost-cutting programme - and allowing the bank to achieve its annual savings of £352m. With the integration of HBOS - rescued by Lloyds during the 2008 banking crisis - complete, Horta-Osório also targeted 15,000 job cuts on top of the 30,000 already axed through the takeover. Some 3,290 job cuts were announced in the first quarter, taking the total to 5,388 since the start of the cost-cutting programme - and allowing the bank to achieve its annual savings of £352m.
The 7% reduction in costs and a 36% fall in the impairment charge to £1.7bn offset a 15% fall in income to £4.5bn during the quarter and the bank's shares were the biggest risers in the the FTSE 100 in early trading, up 1.8% to 31.5p. The taxpayer owns just under 40% of Lloyds Banking Group.The 7% reduction in costs and a 36% fall in the impairment charge to £1.7bn offset a 15% fall in income to £4.5bn during the quarter and the bank's shares were the biggest risers in the the FTSE 100 in early trading, up 1.8% to 31.5p. The taxpayer owns just under 40% of Lloyds Banking Group.
"The key area of strength relative to market expectations appears to be impairments, in our view," said Gary Greenwood, banks analyst at Shore Capital, who also described the extra PPI charge as "disappointing"."The key area of strength relative to market expectations appears to be impairments, in our view," said Gary Greenwood, banks analyst at Shore Capital, who also described the extra PPI charge as "disappointing".
Greenwood expects to reduce his forecast for full year profits because of the weaker revenue.Greenwood expects to reduce his forecast for full year profits because of the weaker revenue.
Horta-Osório insisted Lloyds remained to track to meet the deadline of November 2013 imposed by Europe for the sale of 632 branches, code-named Verde. While talks with the Co-op are no longer exclusive because of a number of regulatory glitches, the bank is continuing to work on a stock market flotation and will consider a sale to NBNK, run by former Northern Rock boss Gary Hoffman, if the shell vehicle can prove that regulatory hurdles can be overcome. Horta-Osório insisted Lloyds remained on track to meet the deadline of November 2013 imposed by Europe for the sale of 632 branches, code-named Verde. While talks with the Co-op are no longer exclusive because of a number of regulatory glitches, the bank is continuing to work on a stock market flotation and will consider a sale to NBNK, run by former Northern Rock boss Gary Hoffman, if the shell vehicle can prove that regulatory hurdles can be overcome.
After the sale of the branches, Lloyds will still have a 19% share of small business banking and has pledged to lend £12bn to such businesses this year. Some £3.25bn was lent in the first quarter and Lloyds insisted that its net lending - which includes loans being repaid - was up 4% compared with a 4% contraction across the industry.After the sale of the branches, Lloyds will still have a 19% share of small business banking and has pledged to lend £12bn to such businesses this year. Some £3.25bn was lent in the first quarter and Lloyds insisted that its net lending - which includes loans being repaid - was up 4% compared with a 4% contraction across the industry.
He also said he could "absolutely" rule out the sale of insurance arm Scottish Widows despite persistent speculation that bids are prepared for the operation.He also said he could "absolutely" rule out the sale of insurance arm Scottish Widows despite persistent speculation that bids are prepared for the operation.
The bank is accelerating is reduction in non-core assets by £5bn to at least £30bn and will reach its £90bn target for 2012 a year earlier, in 2013. The bank is accelerating its reduction in non-core assets by £5bn to at least £30bn and will reach its £90bn target for 2012 a year earlier, in 2013.
It also hopes to have a loan-to-deposit ratio - which measures whether banks have enough savings to support their lending - of 120% after reporting an improvement to 130% at the end of March.It also hopes to have a loan-to-deposit ratio - which measures whether banks have enough savings to support their lending - of 120% after reporting an improvement to 130% at the end of March.
The bank faced major problems in funding itself during the banking crisis and now has £12.9bn left to repay under the credit guarantee scheme provided by the Bank of England after reducing its reliance on this facility by £10.6bn in the first quarter. It had, however, drawn £11.2bn from the European Central Bank's long-term refinancing operation (LTRO), one of the ways Europe is attemping to support its banking system. The bank faced major problems in funding itself during the banking crisis and has £12.9bn left to repay under the credit guarantee scheme provided by the Bank of England after reducing its reliance on this facility by £10.6bn in the first quarter. It had, however, drawn £11.2bn from the European Central Bank's long-term refinancing operation (LTRO), one of the ways Europe is attemping to support its banking system.
"We think the outcome for the market and the eurozone continues to be uncertain," he said."We think the outcome for the market and the eurozone continues to be uncertain," he said.
Lloyds Banking Group has also hired Cathy Turner from Barclays to be the new chief administrative officer - one of a number of management changes Horta-Osório promised after returning to work earlier this year following a period of sick leave caused by extreme fatigue.Lloyds Banking Group has also hired Cathy Turner from Barclays to be the new chief administrative officer - one of a number of management changes Horta-Osório promised after returning to work earlier this year following a period of sick leave caused by extreme fatigue.