Home MoneyFinancial Institutions Lloyds Posts Unexpected First-Half Loss On Insurance Redress

Lloyds Posts Unexpected First-Half Loss On Insurance Redress

by Amwal Al Ghad English

Lloyds Banking Group Plc (LLOY), the first of Britain’s four biggest banks to report first-half earnings, posted an unexpected loss after setting aside additional money to compensate clients mis-sold loan insurance.

The net loss narrowed to 641 million pounds ($993 million) from 2.28 billion pounds in the year-earlier period, the London- based lender said in a statement today. Analysts had estimated the bank would report a 314 million-pound profit, according to the median estimate of five surveyed by Bloomberg. Lloyds set aside a further 700 million pounds in the second quarter to compensate customers mis-sold payment protection insurance.

Today’s provision brings the total the bank has earmarked for redress to 4.3 billion pounds, more than the sum set aside by Lloyds’s three largest British competitors. U.K. banks are compensating clients who were forced to buy, or didn’t know they had purchased, insurance to cover payments on credit cards and mortgages in case of illness of unemployment.

“This is an industry-wide problem, and other banks are going to follow Lloyds and do something similar,” said Gary Greenwood, an analyst at Shore Capital in Liverpool. “The banks underestimated how aggressive the lawyers were going to be in pursuing PPI claims.”

Lloyds fell 1.7 percent to 28.80 pence as of 9:43 a.m. in London trading today. The shares have gained 12 percent this year, making it the best performer in the six-member FTSE 350 Banks Index. The government, which owns about 40 percent of the bank, paid about 73.6 pence a share for its stake.

Bloomberg

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