Lloyds profits increases to £1.2 billion while PPI compensation costs rise by £1.4 billion

Lloyds Banking Group has set aside a further £1.4bn to cover compensation claims by customers who were mis-sold payment protection insurance (PPI), but has declared a 38% rise in half year profits to £1.2bn, it was reported on Friday.

A total of £13bn for compensation costs has now been set aside by the bank, which was bailed out by the UK government during the financial crisis and received £22.5bn of taxpayers’ money.

The bank was recently fined a record £117m by the Financial Conduct Authority (FCA) over the mis-sold PPI.

Lloyds is said to have identified approximately 1.2 million previously defended PPI complaints for re-review at the end of 2014, but this figure has now increased to 1.4 million cases. Those cases were being reviewed following a fine by the FCA, as a result of an investigation into the way that around 2.3 million complaints were handled. The FCA investigation found the bank mis-handled complaints between March 2012 and May 2013.

According to reports, the three months to the end of June represents the last quarter in which the bank can make set aside PPI compensation against its corporation tax bill.

Antonio Horta-Osorio, Lloyds’ chief executive, was quoted as saying: “Today’s results demonstrate the strong progress we have made in the first half of the year.

“We remain focused on our aim to become the best bank for customer sand shareholders, while at the same time supporting the UK economy.”

The UK government has reduced its stake in the bank to 15%, down from the 43% that it bought at the height of the financial crisis This stake has been steadily reduced over the twelve months by sales of shares to institutional investors. Analysts expect the government to announce a discounted share sale to the public in the early half of next year, when the stake is set to be as low at 5%.