It said it was setting aside an additional £1.4bn.
Advertisement
It said the extra provision reflected “higher than expected reactive complaints with higher associated redress”.
It is one of a number of scandals, including the attempted rigging of benchmark interest and foreign exchange rates, which have undermined public trust in Britain’s banks.
Chief executive Antonio Horta-Osorio said the addition of a further PPI provision was “disappointing” but that the bank was able to take the action “from a position of financial and capital strength”.
The government has cut its stake in Lloyds to less than 15 per cent from 43 per cent.
Lloyds is now reviewing or automatically upholding around 1.2m PPI complaints. “I understand the political commitment to a retail share offer and we will do whatever is needed”.
Any decision to cease a sale that has been extremely successful in turning a profit for the taxpayer would be controversial.
Its half-year report, published today, shows the group lent £16bn to borrowers in the first six months of the year, down from £19.8bn in the same period last year.
He added that if any bank fails to do this, the regulator must step in. Shares fell 0.5p to 85.5p.
“Our goal is to manage this bank as well as possible”, Horta-Osorio said.
Details on pricing have yet to be confirmed, but any member of the general public buying shares would get exposure to a growing UK bank.
RBS has so far set aside £3.8 billion, HSBC’s figure is £2.6 billion and Santander is at £846 million.
The future looks bright.
Lloyds reported a first-half statutory profit of £1.2bn, up 38 per cent from a year ago but well below analysts’ expectations because of the PPI charge.
The bank’s improving health facilitated the return to paying dividends earlier this year, when Lloyds declared a symbolic 0.75p per share for 2014, the first such distribution since the crisis struck.
Earlier this week, Barclays’ compensation bill for PPI climbed to £6billion after it made another £600million provision in the first half.
Lloyds’ strategy includes developing its digital offering and reducing costs.
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.
Advertisement
Unlike Lloyds, Royal Bank of Scotland Group Plc remains “subject to certain mergers and acquisitions restrictions”, because of EU rules linked to its 45.5 billion-pound bailout, RBS Chief Financial Officer Ewen Stevenson told reporters at a meeting on Thursday.
