PPI penalties hurt Lloyds Q3 figures

Once again, past issues with mis-selling have harmed the bank’s quarterly figures.

A recurring theme has run through so many of Lloyds’ figures over the last couple of years, and today’s announcement that another £500 million has been set aside for the mis-selling of PPI brings the total to £8 billion. Although allocating large amounts for this misdemeanour is not unique among UK banks, Lloyds has left everyone else in the shade in terms of the volume of funds required to rectify the situation.

Striking a considerably more positive note is the 83% increase in the bank’s underlying profits, helped by fewer write-downs in bad debts, reduced costs and improving margins. The underlying profit for the third quarter is now £1.52 billion, and the management’s outlook for the future is unsurprisingly optimistic. Although it would be advantageous to remove the overhanging cloud of PPI, the day-to-day running of the bank is on a considerably sounder footing.

Investors will now be asking how close we are to the time when the UK government will extract itself from the bank. Judging by the success of the Royal Mail IPO, confidence in Whitehall must be high that it could actually turn a profit. And that would be a handy ahead of any potential general election.

Lloyds Banking Group plc chart

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.