Lloyds Banking group could be on the hook for a £1bn charge after misselling credit card insurance, according to a brokers note from Credit Suisse.

Lloyds Credit Card PPI


Analyst Jonathan Pierce claims Lloyds is vulnerable to £1bn of payment protection insurance (PPI) ‘redress’ after the banks were found guilty of overcharging and misselling customers insurance on their credit cards.

Although it is not clear how many customers will come forward and make financial claims against the bank, the Financial Services Authority’s own estimates are too conservative, Mr Pierce says. Instead he points to a £375m charge that Bank of America Merrill Lynch took last week when the US lender reported its third-quarter earnings.

‘Simply pro-rating the Bank of America charge we think the [Lloyds’] figure could be over £1bn.’ He adds that it is not clear how Bank of America reached that figure and whether ultimately it could have accounted for too big a hit.

However, Mr Pierce’s note echoes concerns held by hedge funds and a Deutsche Bank note from July that also suggested incoming charges for Lloyds would exceed previous expectations.

Lloyds has never made clear how much it thinks it could be liable for over PPI. Earlier this month it clashed the regulator after putting some customer complaints about mis-sold PPI on hold until a forthcoming judicial review is heard.

Between 2005 and 2009, PPI revenues at banks totalled £17bn and a significant portion of these are considered missold by the FSA, according to the Deutsche Bank note. The City watchdog estimates the misselling scandal will cost the industry £1bn-£3bn over the next five years.

However, the FSA assumption is based on less than 45pc of customers responding and less than 10pc of those being successfully being upheld. Lloyds would incur a charge of £806m if 75pc of customers made claims.

PPI Claims News

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The recent increase in PPI complaints being recieved by the FOS is a direct results of Banks rejecting increasing numbers of legitimate PPI complaints being sent to them. The FOS has upheld 8 out of 10 PPI complaints forwarded to them.

This 80% of upheld complaints by the FOS highlights how the Banks are increasingly rejecting valid PPI complaints being made by customers.

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The Financial Ombudsman Service (FOS) has been buried by more than 600,000 complaints about PPI since 2000. Nearly half of those complaints have been filed since July1, 2012. Between that July date and the end of December in 2012, 283,251 complaints have been filed with the ombudsman. That was an increase of 110 percent over the previous six months.

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The figures are collected from 26 firms and financial institutions that made up for 96% of all the Payment Protection Insurance complaints from last year.

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Tim Capper reports on Financial Mis-Selling for Maple Leaf Financial. Our aim is to ensure you get honest advice and proper guidance to ensure a suitable recommendation can be made to pursue a financial claim

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Tim Capper

Bringing you financial news and information in plain english for Maple Leaf Financial. My aim is to help readers understand these often complex financial instruments.