Lloyds reports loss after PPI hit

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Taxpayer-backed Lloyds Banking Group today revealed a first-half loss after taking an additional £700m hit for mis-selling payment protection insurance (PPI).

The 40 per cent state-owned bank has now set aside a total of more than £4.2bn to deal with PPI compensation after another increase in the volume of claims.

Lloyds, which warned that the final provision for PPI mis-selling may change, revealed pre-tax losses of £439m for the six months to June 30, compared with a £3.3bn loss in the same period last year.

Turning to the Libor-fixing affair that has rocked the banking industry in recent weeks, Lloyds said it was currently not possible to “predict the scope and ultimate outcome” of various investigations.

Lloyds, which includes the Halifax, was pushed to an annual loss of £3.5bn in 2011 by the PPI mis-selling scandal, leaving taxpayers wondering when they will get their money back.

The scale of the claims faced by the bank was underlined by figures showing it had 1,000 staff working on incorrect or fake claims alone, driven by claims management companies.

Chief executive Antonio Horta Osorio’s strategic review has already announced thousands of job losses, as well as plans to sell off large parts of its international operations.

The group said it had cut its non-core assets by £23bn to £118bn in the period, which is ahead of expectations, while its international presence continues to decline, after it announced disposal or exit from 10 countries.

But this has hit underlying income which fell 17 per cent to £9.2bn.

Mr Horta Osorio also said the bank was looking to implement ring-fencing proposals, put forward by the Independent Commission for Banking, ahead of the 2019 deadline suggested by the Government.

The move would see Lloyds’ retail operations separated from more complex, investment banking products.

Lloyds cut its provision for bad debts to £3.1bn, down 42 per cent from the same period last year, while its exposure to troubled eurozone countries Portugal, Ireland, Italy, Spain and Greece reduced 13 per cent to £21.3bn.

Last week, Lloyds reached a major milestone when it finally agreed the sale of 632 branches to the Co-operative Group for up to £750m.

While the bank admitted it would make a loss on the sale, some commentators said the deal was a crucial step in Lloyds’ recovery.