This article is from the source 'independent' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.independent.co.uk/news/business/news/lloyds-firsthalf-profits-plunge-as-cost-of-ppi-compensation-tops-10bn-9640021.html

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
Lloyds first-half profits plunge as cost of PPI compensation tops £10bn Lloyds first-half profits plunge as cost of PPI compensation tops £10bn
(about 14 hours later)
Lloyds Banking Group revealed today profits fell more than 50 per cent in the first-half as it announced the bill for compensating payment protection insurance customers has smashed through the £10 billion barrier. Britain’s biggest lender today sought to calm fears that higher interest rates could trigger a mortgage crisis, as its compensation bill for mis-selling payment protection insurance (PPI) smashed through the £10bn barrier.
The bank increased its PPI provisions by £600 million, saying it was expecting more complaints as a result of mail-outs and warning of increased clear-up costs, even as it pledged to apply to regulators to pay its first dividend since the financial crisis. Lloyds Banking Group increased its PPI provisions by £600m, saying the money was needed to cover a rise in complaints triggered by mail outs, as the costs of clearing up the scandal mount.
Lloyds’ total bill for clearing up the scandal stands at £10.4 billion, including £2.2 billion of expenses. Some  £2.3 billion has yet to be claimed. Despite reporting better than expected underlying profits of £3.8bn for the first half, up nearly a third, the provision knocked the share price, which finished down 2.81 per cent at 74.26p.
A further £50 million was set aside to cover the cost of interest-rate swaps mis-selling and £225 million for issues hailing from Lloyds’ retail bank. TSB, spun out of Lloyds, announced that it had been buoyed by grabbing 9 per cent of current accounts switches, well ahead of its 6 per cent target, even as profits fell 17 per cent to £78.6m. The bank attributed this to a £62.4m rise in costs ?as it “no longer benefits from the economies of scale of a larger group”.
Chief executive Antonio Horta-Osorio once again apologised for the conduct of Lloyds traders, found to have tried to cheat the Bank of England out of fees it was due as a result of taking part in the Special Liquidity Scheme during the financial crisis. TSB is struggling with mortgages, because it does not yet have the ability to sell through intermediaries.
He said: “I would like to say once again the actions of these individuals were unacceptable.” Lloyds, however, reported gross lending of £20bn in the first half, £6bn higher than the same period in 2013, with one in four new borrowers dealing with one of the bank’s brands, which also include Halifax and Bank of Scotland.
The interest-rate fixing — which resulted in £226 million in fines and compensation announced earlier this week — led to Bank of England Governor Mark Carney firing off a furious missive to Lloyds chairman Lord Blackwell. Its chief executive, Antonio Horta-Osorio, said he expected interest rates to rise but added: “It’s not so important when, it’s more how fast and what will be the new normal. My opinion is rates will rise slower and end up lower than we are used to, with the normal being perhaps 3 per cent.”
It will be the Bank of England’s Prudential Regulation Authority which will decide on Lloyds’ dividend bid. But the bank’s bosses said they believed watchdogs would look purely at its “performance” when asked if the company feared its misconduct could have an impact on the decision. While repossessions will rise, so will margins for retail and commercial banks. But the problems created by Lloyds’ forays into investment banking are still weighing on the group.  Mr Horta-Osorio kicked off a conference call by once again apologising for the actions of its traders, who conspired to fix interest rates with the aim of cutting fees due to the Bank of England for participating in its Special Liquidity Scheme of short term loans during the financial crisis.
The scandals meant statutory, pre-tax profits slumped to £863 million, down £1.1 billion. “I would like to say once again, the actions of these individuals were unacceptable and we condemn them without reservation. I am sorry for the impact these individuals have had on our shareholders, colleagues and reputation.”
However, Lloyds’ preferred measure of underlying profits came in at £3.8 billion for the six months to the end of June, up nearly a third, on income of £9.3 billion, up 4 per cent. The interest rate fixing – which lead to £226m in fines and compensation – prompted the Bank’s Governor, Mark Carney, to fire off a furious missive to Lloyds’ chairman, Lord Blackwell.
The profits were boosted by a sharp fall in provisions for bad debt, down 58 per cent to £758 million. However, Lloyds said it did not believe it would affect the Bank’s decision on whether it can pay a dividend again. 
The numbers were well received by analysts — Ian Gordon at Investec said they showed “solid, underlying performance” — but the shares were down by more than 2 per cent to 74.37p, below the 75p level at which the Government makes a profit on selling down more of the taxpayer’s 24.9 per cent stake. The cost of the scandals meant that statutory pre-tax profits slumped to £863m, down £1.1bn on a year ago.