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Lloyds is setting aside an extra £500 million ($765 million) to deal with claims it illegally sold payment protection insurance, bringing its total bill to £13.9 billion.
The bank said “a number of risks and uncertainties remain,” because a lot of the PPI complaints were driven by claims management companies.
Investors weren’t happy. Lloyds shares tumbled 4.5% as markets opened on Wednesday.
Lloyds announced a 6% boost in underlying profit in the first nine months to the end of September.
The bank sold off its portfolio of toxic loans to Irish companies and cut costs.
Lloyds CEO Antonio Horta-Osorio said Lloyds is making “strong progress towards becoming the best bank for customers and shareholders while delivering resilient financial performance and further strengthening our market leading capital ratios.”
The UK government is planning to sell a £2-billion-pound stake in Lloyds to private investors next year, The bank was bailed out during the 2008 financial crisis at a cost of around £20 billion.
Lloyds is betting strongly on PPI claims tapering off. It’s extra £500 million provision assumes “a significant decrease in reactive complaint volumes over the next 15 months, compared with trends in recent quarters.”
So the bank could see an even bigger hit in the future if claims continue.