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Lloyds Banking Group reports loss on £3bn PPI provision Lloyds Banking Group reports loss on £3bn PPI provision
(about 2 hours later)
Lloyds Banking Group has announced a first quarter loss, after making a £3.2bn provision for mis-selling claims by customers who took out payment protection insurance (PPI).Lloyds Banking Group has announced a first quarter loss, after making a £3.2bn provision for mis-selling claims by customers who took out payment protection insurance (PPI).
Lloyds reported a loss of £3.47bn for the first three months of the year. It made a £721m profit a year ago.Lloyds reported a loss of £3.47bn for the first three months of the year. It made a £721m profit a year ago.
It also took a charge of £1.1bn to allow for further falls in commercial property prices in the Irish Republic.It also took a charge of £1.1bn to allow for further falls in commercial property prices in the Irish Republic.
Its PPI provision was much bigger than expected and the bank's shares fell 8%.Its PPI provision was much bigger than expected and the bank's shares fell 8%.
However, the bank's core business showed growth as customer loans and deposits rose from £842bn to £847.8bn.However, the bank's core business showed growth as customer loans and deposits rose from £842bn to £847.8bn.
"The bank as a whole appears to be getting better and appears to be taking a larger market share," said Ralph Silva, banking analyst at SRN."The bank as a whole appears to be getting better and appears to be taking a larger market share," said Ralph Silva, banking analyst at SRN.
Before the provision for PPI compensation and other one-off items, the bank said it had made a profit in the quarter of £284m.Before the provision for PPI compensation and other one-off items, the bank said it had made a profit in the quarter of £284m.
The results were the first presented by new Lloyds chief Antonio Horta-Osorio, who replaced Eric Daniels on 1 March.The results were the first presented by new Lloyds chief Antonio Horta-Osorio, who replaced Eric Daniels on 1 March.
'Embarrassment''Embarrassment'
In February, Lloyds announced that it had returned to profit in 2010.In February, Lloyds announced that it had returned to profit in 2010.
It made a profit of £2.21bn, having reported losses of more than £6bn in both 2008 and 2009.It made a profit of £2.21bn, having reported losses of more than £6bn in both 2008 and 2009.
BBC business editor Robert Peston said the loss in the first quarter of 2011 would be an "embarrassment" for Lloyds, given that it trumpeted its return to profit last year.BBC business editor Robert Peston said the loss in the first quarter of 2011 would be an "embarrassment" for Lloyds, given that it trumpeted its return to profit last year.
But he said it was not embarrassing for Mr Horta-Osorio, who was not responsible for previous decisions and was now facing up to mistakes of the past.But he said it was not embarrassing for Mr Horta-Osorio, who was not responsible for previous decisions and was now facing up to mistakes of the past.
The new chief has already announced management changes as part of a shake-up at the bank.The new chief has already announced management changes as part of a shake-up at the bank.
In June, he will reveal more details about his long-term strategy for Lloyds.In June, he will reveal more details about his long-term strategy for Lloyds.
Industry hitIndustry hit
PPI policies are supposed to repay a person's loan if their income drops because they fall ill or lose their job. But thousands of people have received compensation because they were mis-sold policies.PPI policies are supposed to repay a person's loan if their income drops because they fall ill or lose their job. But thousands of people have received compensation because they were mis-sold policies.
Lloyds' decision on PPI could hardly be more dramatic, or more expensive for the bank.Lloyds' decision on PPI could hardly be more dramatic, or more expensive for the bank.
It has thrown in the towel after years in which the banking industry has denied there was much of a problem.It has thrown in the towel after years in which the banking industry has denied there was much of a problem.
Banks have fobbed off hundreds of thousands of complaining customers.Banks have fobbed off hundreds of thousands of complaining customers.
Of course, not all PPI policies were mis-sold and some have paid out.Of course, not all PPI policies were mis-sold and some have paid out.
But millions were sold, by credit card and hire purchase providers as well as banks.But millions were sold, by credit card and hire purchase providers as well as banks.
The FSA's initial estimate of an industry-wide bill for mis-selling of a bit over £3bn is now looking like a wild underestimate.The FSA's initial estimate of an industry-wide bill for mis-selling of a bit over £3bn is now looking like a wild underestimate.
The chances must be that the rest of the banks will finally do as they have been told by the regulators.The chances must be that the rest of the banks will finally do as they have been told by the regulators.
The Financial Services Authority (FSA) published guidelines last year which said banks should contact all past PPI customers and invite them to complain if they thought they had been mis-sold PPI.The Financial Services Authority (FSA) published guidelines last year which said banks should contact all past PPI customers and invite them to complain if they thought they had been mis-sold PPI.
UK banks, led by the British Bankers' Association (BBA), challenged those guidelines, arguing that the rules were unfair because they were retrospective.UK banks, led by the British Bankers' Association (BBA), challenged those guidelines, arguing that the rules were unfair because they were retrospective.
But last month a High Court judge rejected their challenge, meaning that banks could face huge compensation bills.But last month a High Court judge rejected their challenge, meaning that banks could face huge compensation bills.
The BBA is now considering whether to mount a new legal challenge, but Mr Horta-Osorio told reporters that Lloyds would no longer be participating in the BBA's judicial review.The BBA is now considering whether to mount a new legal challenge, but Mr Horta-Osorio told reporters that Lloyds would no longer be participating in the BBA's judicial review.
"We do not want to continue a long-standing debate of this with the regulator," he said."We do not want to continue a long-standing debate of this with the regulator," he said.
Robert Peston said Lloyds' decision to settle with PPI claimants was a unilateral one, but could lead to other banks following suit.Robert Peston said Lloyds' decision to settle with PPI claimants was a unilateral one, but could lead to other banks following suit.
"The size of Lloyds' charge implies that the big British banks will in total take a £9bn hit to settle PPI claims," he said."The size of Lloyds' charge implies that the big British banks will in total take a £9bn hit to settle PPI claims," he said.
Customer claimsCustomer claims
Lloyds has thousands of PPI complaints stacked up.Lloyds has thousands of PPI complaints stacked up.
These will now be processed, the bank says, after having been put on hold while the recent High Court case reached its conclusion.These will now be processed, the bank says, after having been put on hold while the recent High Court case reached its conclusion.
All other customers of Lloyds, including those of the former HBOS bank, are now being invited to contact the bank if they think they have a claim.All other customers of Lloyds, including those of the former HBOS bank, are now being invited to contact the bank if they think they have a claim.
At this stage it is not clear if the bank will send letters to all past PPI customers, of whom there could be several million. It is not revealing exactly how it has quantified the eventual cost as being £3.2bn.
Nor is it revealing exactly how it has quantified the eventual cost as being £3.2bn.
Were you mis-sold PPI? Are you a Lloyds customer? Send us your comments.Were you mis-sold PPI? Are you a Lloyds customer? Send us your comments.