Five questions answered on Lloyds’ announcement on increasing PPI provisions

Will it affect the groups’ profits?

Lloyds Banking Group today announced it is to increase its provision for the mis-selling of payment protection insurance (PPI). We answer five questions on the bank's announcement.

By how much is the bank increasing its PPI provisions?

The group said it will increase the fund by another £1.8bn, bringing the total to nearly £10bn. It said this extra provision reflects an increase in successful claims.

Has this affected the group's profits?

The banking group also announced that its underlying profits for 2013 would be £6.2bn, which is nearly double what analysts have been expecting. As a result, the bank has said it could restart dividend payments this year. Lloyds has not paid any dividends to shareholders since 2008.

What is the total cost of the PPI scandal expected to be for all banks?

The bill for all banks is expected to be around £20bn.

What else has Lloyds said?

Antonio Horta-Osorio, chief executive of Lloyds, said: "Our profitability, despite legacy issues, is testament to the strength of our business model and the commitment of our people, and has enabled the UK government to start to return the bank to full private ownership.”

The bank also announced it will be setting aside another £130m to cover the cost of compensation payments to SMEs mis-sold interest rate hedging products.

Does the government still have shares in the Lloyds bank?

Yes, the UK government still owns 32.7 per cent of the bank's shares. However, it hopes to sell these, most likely in April, because it wants the bank to return to private ownership by the next general election.

The Lloyds building in London. Photograph: Getty Images.

Heidi Vella is a features writer for Nridigital.com

Photo: Getty
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Can Philip Hammond save the Conservatives from public anger at their DUP deal?

The Chancellor has the wriggle room to get close to the DUP's spending increase – but emotion matters more than facts in politics.

The magic money tree exists, and it is growing in Northern Ireland. That’s the attack line that Labour will throw at Theresa May in the wake of her £1bn deal with the DUP to keep her party in office.

It’s worth noting that while £1bn is a big deal in terms of Northern Ireland’s budget – just a touch under £10bn in 2016/17 – as far as the total expenditure of the British government goes, it’s peanuts.

The British government spent £778bn last year – we’re talking about spending an amount of money in Northern Ireland over the course of two years that the NHS loses in pen theft over the course of one in England. To match the increase in relative terms, you’d be looking at a £35bn increase in spending.

But, of course, political arguments are about gut instinct rather than actual numbers. The perception that the streets of Antrim are being paved by gold while the public realm in England, Scotland and Wales falls into disrepair is a real danger to the Conservatives.

But the good news for them is that last year Philip Hammond tweaked his targets to give himself greater headroom in case of a Brexit shock. Now the Tories have experienced a shock of a different kind – a Corbyn shock. That shock was partly due to the Labour leader’s good campaign and May’s bad campaign, but it was also powered by anger at cuts to schools and anger among NHS workers at Jeremy Hunt’s stewardship of the NHS. Conservative MPs have already made it clear to May that the party must not go to the country again while defending cuts to school spending.

Hammond can get to slightly under that £35bn and still stick to his targets. That will mean that the DUP still get to rave about their higher-than-average increase, while avoiding another election in which cuts to schools are front-and-centre. But whether that deprives Labour of their “cuts for you, but not for them” attack line is another question entirely. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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