Taxpayer-backed Lloyds Banking Group has taken an additional 375 million hit to cover payment protection insurance (PPI) claims, it revealed today.

The 40% state-owned bank has now set aside nearly 3.8 billion to deal with compensation after a rapid rise in the volume of claims.

Key Points

  • Lloyds sets aside extra 375 million in PPI redress
  • Bank has now put aside nearly 3.8 billion
  • Total PPI redress up to 3 billion

The group says the final cost of the PPI mis-selling scandal may still change.

This comes on the day the Financial Services Authority reveals compensation paid to victims of PPI mis-selling by all banks hit 3 billion for the period of 2011, plus January and February this year.

Figures released today show a 469 million payout in February, which pushed the total redress figure to the 3 billion mark.

It has been predicted the total redress figure could reach 9 billion.

Banking giant Barclays last week announced it too had taken an additional 300 million hit to cover PPI mis-selling claims.

The bank has now set aside 1.3 billion, up from 1 billion.

PPI compensation hits profits

The news comes as Lloyds Banking Group revealed lower than expected profits today, with pre-tax profits of 288 million for the three months to 31 March, compared with 316 million in the previous quarter and City expectations of 500 million.

It emerged late last year Lloyds TSB was often failing to meet 28-day deadlines to pay compensation, leading to more anger from mis-selling victims (see the Lloyds delays MSE news story).

Additional reporting by the Press Association.