Lloyds and Barclays on Monday said a surge in late claims could see them pay out around $2 billion (Dh7.3bn) more each to settle Britain's costliest consumer banking scandal, the mis-selling of payment protection insurance (PPI).
Lloyds on Monday said it will set aside up to an extra £1.8bn (Dh8.16bn) to settle PPI claims, while Barclays later said it would set aside between £1.2bn-£1.6bn.
Lloyds also said it was suspending its 2019 share buyback programme.
The huge provisions show how banks in Britain are still battling with the legacy of the scandal, even after the August 29 deadline set for consumers to complain, as a rush of customer enquiries in the run-up to that date forced them to set aside more compensation money.
PPI policies were sold alongside a personal loan or mortgage to cover repayments if borrowers fell ill or lost jobs, but many were unsuitable.
Britain's High Court in 2011 ruled that consumers could retroactively seek compensation for mis-sold policies.
The subsequent rush of claims has been a boon for consumers, egged on by a rise in so-called claims management companies, with lenders having paid out more than £36bn in total and the final tally expected to top £50 billion.
RBS said last week it faced additional costs of up to £900m, while Clydesdale Bank made a fresh £300m-£450m provision.
As Britain's biggest domestic lender, Lloyds has been the most exposed to PPI and has already paid out more than £20 billion.
Lloyds said on Monday it had received 600,000-800,000 requests for information about PPI per week in August, well above its expectations of around 190,000 per week.
As a result, it expects to set aside a further £1.2bn-£1.8bn in its third quarter results to cover payouts.
Lloyds also said it had received a claim submitted by the Insolvency Service's Official Receiver on behalf of bankrupt consumers, pushing costs higher.
It added the charge would dent its profitability and it scrapped guidance for a return on tangible equity of around 12 per cent this year. It also warned the increase in its capital ratio in 2019 would be below its 170-200 basis points per annum guidance.
Barclays said it still aims to hold its core capital level at its 13 per cent target by year-end.
Lloyds made PPI provisions worth £650m in the first half of this year, meaning the total combined cost for 2019 could hit as much as £2.45bn, equivalent to 41 per cent of its £6bn pre-tax profit last year. The bank set aside £750m for PPI claims in 2018.
Analysts at broker KBW said the top end of the Lloyds charge, at £1.8bn, was marginally better than their worst-case scenario, while the Barclays provision was higher than the £700m they had predicted.
Lloyds was given some breathing space on capital in May, when regulators reduced its required core capital ratio to 12.5 per cent, from 13 previously, equating to around £1bn.
Lloyds is continuing to target paying a dividend and said it would make a decision on surplus capital at the end of the year.
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Tips to stay safe during hot weather
- Stay hydrated: Drink plenty of fluids, especially water. Avoid alcohol and caffeine, which can increase dehydration.
- Seek cool environments: Use air conditioning, fans, or visit community spaces with climate control.
- Limit outdoor activities: Avoid strenuous activity during peak heat. If outside, seek shade and wear a wide-brimmed hat.
- Dress appropriately: Wear lightweight, loose and light-coloured clothing to facilitate heat loss.
- Check on vulnerable people: Regularly check in on elderly neighbours, young children and those with health conditions.
- Home adaptations: Use blinds or curtains to block sunlight, avoid using ovens or stoves, and ventilate living spaces during cooler hours.
- Recognise heat illness: Learn the signs of heat exhaustion and heat stroke (dizziness, confusion, rapid pulse, nausea), and seek medical attention if symptoms occur.
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In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
Conflict, drought, famine
Estimates of the number of deaths caused by the famine range from 400,000 to 1 million, according to a document prepared for the UK House of Lords in 2024.
It has been claimed that the policies of the Ethiopian government, which took control after deposing Emperor Haile Selassie in a military-led revolution in 1974, contributed to the scale of the famine.
Dr Miriam Bradley, senior lecturer in humanitarian studies at the University of Manchester, has argued that, by the early 1980s, “several government policies combined to cause, rather than prevent, a famine which lasted from 1983 to 1985. Mengistu’s government imposed Stalinist-model agricultural policies involving forced collectivisation and villagisation [relocation of communities into planned villages].
The West became aware of the catastrophe through a series of BBC News reports by journalist Michael Buerk in October 1984 describing a “biblical famine” and containing graphic images of thousands of people, including children, facing starvation.
Band Aid
Bob Geldof, singer with the Irish rock group The Boomtown Rats, formed Band Aid in response to the horrific images shown in the news broadcasts.
With Midge Ure of the band Ultravox, he wrote the hit charity single Do They Know it’s Christmas in December 1984, featuring a string of high-profile musicians.
Following the single’s success, the idea to stage a rock concert evolved.
Live Aid was a series of simultaneous concerts that took place at Wembley Stadium in London, John F Kennedy Stadium in Philadelphia, the US, and at various other venues across the world.
The combined event was broadcast to an estimated worldwide audience of 1.5 billion.
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UAE currency: the story behind the money in your pockets
