Lloyds Banking Group PLC will book an incremental charge in the range of £1.2 billion to £1.8 billion in the third quarter to cover costs related to mis-sold payment protection insurance, the biggest additional provision so far taken by a U.K. bank as the sector seeks to close what is considered as the costliest consumer scandal it has ever faced.
The London-based lender's shares opened in the red Sept. 9, trading around 1.20% lower as of 8:01 a.m. London time.
The bank said it received around 600,000 to 800,000 information requests every week a month before the Aug. 29 deadline to seek redress, with direct complaints also spiking. Although the surge was widely expected, the volume of requests was still higher than previously expected, with Lloyds having disclosed in July that it had received then roughly 190,000 requests weekly.
In the first half, Lloyds had also taken a £650 million charge over the matter, with some £1.08 billion in utilized funds relating to complaints and associated administration costs.
Lloyds' board also moved to suspend the remainder of the bank's £1.75 billion share buyback program for 2019, with about £600 million of the amount expected to be untapped at mid-September. Despite the additional costs, the bank noted that it still aims to pay out "a progressive and sustainable ordinary dividend" for the year.
Given the additional provision, Lloyds expects its capital growth in 2019 to fall short of its current yearly guidance of 170 basis points to 200 basis points. It also expects to miss its roughly 12% statutory return on equity guidance for the year.
Lloyds is the latest lender to disclose how much the final stage of the PPI scandal will cost, following Royal Bank of Scotland Group PLC and CYBG PLC.
CYBG said it received 120,000 information requests in the three days before the deadline, while RBS has received roughly 200,000 claims on the last day alone, The Sunday Times noted. Co-operative Bank PLC also said it had received a "substantially greater volume" of inquiries and complaints but is yet to disclose an expected provision.
Analysts at Goodbody recently told S&P Global Market Intelligence that Lloyds and CYBG would likely take on more costs in the third quarter. S&P Global Ratings also said the scandal has forced the industry to take over £45 billion in total provisions.
