Lloyds Banking Group will consider paying special dividends and share buybacks after first-half profit climbed 38 percent, even as it took a 1.4 billion-pound ($2.2 billion) charge for improperly sold loan insurance.
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It also included £175 million set aside for complaints over the mis-selling of packaged bank accounts – products where customers pay a fee in exchange for benefits.
The PPI provision announced today was part of a total £1.8 billion set aside for conduct issues as the lender continues to be haunted by past misdeeds.
Lloyds will pay an interim dividend of 0.75 pence a share, it said in a statement on Friday, when reporting first-half earnings.
Lloyds chief executive Antonio Horta-Osorio says: “The additional provision for PPI is disappointing and mostly reflects higher than expected reactive complaints with higher associated redress”.
‘We remain focused on our aim to become the best bank for customer sand shareholders while at the same time supporting the UK economy.’.
“Our goal is to manage this bank as well as possible”, Horta-Osorio said.
However, after the PPI charge and other one-offs including £660 million handed to Spanish bank Sabadell as part of its £1.7 billion takeover of former Lloyds subsidiary TSB, pre-tax profits were up 38% to £1.2 billion.
Last month, Lloyds was hit with a £117million fine by the financial regulator over the way it had treated up to 2.3m customers reclaiming compensation over PPI.
Telegraph columnist James Quinn has said that the government could avoid a retail offer of Lloyds shares and keep its “powder dry” for the exit of Royal Bank of Scotland, where a profitable alternative is unlikely given the share price remains well below the 2008 level.
He said the current process of “dripping” shares into the market, which had resulted in the disposal of around 10% of its capital being disposed of in around six months without any discount needed, was “shrewd”.
“As well as a negative impact if interest rates go out further than expected, Lloyds has paid upwards of £13bn in PPI claims”, he expanded.
The British government has cut its stake in Lloyds to less than 15 per cent from 43 per cent, and British finance minister George Osborne said he plans to sell some of the remainder to private shareholders.
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The bank said profits for the six months to the end of June were £1.19bn compared with £863m a year earlier.
