Lloyds Banking Group (LON:LLOY) reported on Monday that it will dedicate an additional £1.8 billion in order to settle any claims of mis-sold PPI (Payment Protection Insurance).
Shares in the bank were down during trading on Monday.
In its half year results, published at the end of July, the British bank reported a PPI charge for the first half of 2019 that amounted to £650 million.
At the time of its half year results, Lloyds expected PPI claims to continue at a rate of 190,000 per week, but this was not the case.
The bank received a higher volume of claims than expected, and it experienced a “significant spike” in the final days before the deadline.
In the last month leading up to the deadline, Lloyds received roughly 600,000-800,000 claims each week.
Lloyds now expects an extra hit of £1.2 billion – £1.8 billion.
The deadline for customers to claim mis-sold PPI was 29 August. As it stands, £36 billion has already been paid out by British banks in order to compensate consumers. Of the figure, £2 billion was paid out between 1 January and 30 June 2019. Once administration costs are included, total costs have amounted to £48.5 billion.
The Financial Conduct Authority (FCA) delivered a nationwide communications campaign in order to raise awareness of this deadline to consumers who may have been mis-sold PPI.
According to the FCA, the average payment is roughly £1,700 – but this can vary from customer to customer.
Just last week, the Royal Bank of Scotland (LON:RBS) issued a warning saying that it expects a hit of up to £900 million after it also saw a rise in PPI claims. The bank has been handling complaints about the mis-selling of PPI since 2011.
Shares in Lloyds Banking Group plc (LON:LLOY) were trading at -0.3% as of 12:07 BST Monday.
Shares in the Royal Bank of Scotland plc (LON:RBS) were trading at +1.75% as of 12:08 BST Monday.