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Lloyds boss hits out at 'fraudulent' PPI compensation claims | Lloyds boss hits out at 'fraudulent' PPI compensation claims |
(about 9 hours later) | |
The chief executive of Lloyds Banking Group hit out at fraudulent claims for payment protection insurance compensation on Tuesday as the bailed out bank increased its provision for mis-selling the controversial product by 12% to £3.6bn. | |
António Horta-Osório said the £375m additional provision was 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 he criticised the claims management companies that submitted 45% of the claims the bank received in February and March, from customers who typically bought the insurance when taking out a loan, to cover themselves for illness or other hindrances to paying it back. Of the claims submitted by these firms, 25% were from people without Lloyds products. | |
"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 existing £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. Royal Bank of Scotland is expected to increase its £1bn PPI provision on Friday. | |
Horta-Osório described the debacle over PPI as "unacceptable". He said the culture of banking needed to change, adding that endowments and interest swaps sold to small business customers were 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. | |
Despite the PPI losses, the shares were largest gainers in the FTSE 100, jumping almost 7% to 33.18p, after Horta-Osório promised to update the City at the interim results in July about the prospects of a resumption of the dividend. | |
Ian Gordon, banking analyst at Investec, said this was "more positive than had been expected" even though Horta-Osório made no promise about when payments might restart, following the lifting of the ban imposed by Europe when taxpayers pumped £20bn into the bank. | |
With the integration of HBOS – rescued by Lloyds in 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 he began his cost-cutting programme and allowing the bank to achieve 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. | |
Lloyds insisted it was on track to meet the November 2013 deadline imposed by Europe for the sale of 632 branches, codenamed 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 branch sale, 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, including loans being repaid, was up 4% compared with a 4% contraction across the industry. | |
Horta-Osório also said he could "absolutely" rule out the sale of insurance arm Scottish Widows despite persistent speculation that bids are being prepared. | |
Lloyds now expects to hit its target for a £90bn reduction in its balance sheet a year earlier than expected, in 2013, and also hopes to have a loan-to-deposit ratio – which measures whether banks have enough savings to support their lending – of 120%. It was 130% at the end of March. | |
The bank 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, one way that Europe is trying to support its banking system. | |
Cathy Turner has been hired from Barclays as 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. | |