Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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Zoopla wins back customers from online property rival

Zoopla chief executive Alex Chesterman has branded rival OnTheMarket “a failed experiment”, and said that his property site was winning back customers at a record rate. OnTheMarket was set up last year, aiming to compete with Zoopla and Rightmove, the UK’s two biggest property portals. It allowed estate agents to list their properties more cheaply […]

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Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

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BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Categorized | Banks

Lloyds to take ‘final’ £1.4bn PPI provision

Posted on February 28, 2013

Lloyds Banking Group will today take one of its highest quarterly charges to cover the mis-selling of payment protection insurance as it seeks to draw a line under the affair in its 2012 accounts with a £1.4bn provision.

The number has doubled in the past three weeks as directors have decided to be extra cautious, people close to the bank said.

    Lloyds has already set aside more than £5.3bn in PPI provisions, far more than any other UK bank, and the latest charge risks alienating investors.

    In November, after Lloyds announced a £1bn PPI provision in third-quarter results, one leading shareholder warned: “We are reviewing our holdings in Lloyds. If PPI costs rise further, then that could tip the balance in our decision on whether to hold or sell our shares in the company.”

    However, Lloyds chief executive António Horta-Osório is expected to signal that the £1.4bn provision for the fourth quarter of 2012 should be sufficient to cover any future PPI mis-selling costs, with no provisions anticipated for 2013.

    In total, Britain’s biggest lenders have now set aside nearly £14bn to cover compensation for mis-selling PPI.

    The rate at which new PPI mis-selling claimants are coming forward has slowed markedly in recent months, bankers said.

    Lloyds is also expected to take a significant charge for mis-selling interest rate swaps to small businesses, with the total charge for 2012 rising to as much as £400m, although that is about half the level booked so far by Barclays and Royal Bank of Scotland, the other two big UK banks to have reported annual results so far.

    RBS took a £450m PPI charge with its fourth-quarter results on Thursday, taking the total provision to £2.2bn.

    Last month, the Financial Services Authority fined Lloyds £4.3m for delays in compensating customers for mis-sold PPI.

    FSA rules say that compensation must be paid promptly. However, between May 2011 and March 2012, almost a quarter of customers who received decision letters on PPI redress received payment after the target of 28 days.

    In 8,800 cases, Lloyds took more than six months to pay compensation.

    The PPI mis-selling issue dates back to the time before Mr Horta-Osório was chief executive. Last month, his predecessor Eric Daniels infuriated current Lloyds management when he told the Parliamentary Commission on Banking Standards that the bank’s PPI behaviour had been unfairly criticised. The company had “best in class” controls and provided “the most generous product on the market”, he said.