With PPI deadline looming, Lloyds (LLOY) mis-selling bill rises

A further £550m was added to the bank’s already large bill, bringing the total to £20b.

Article updated: 31 July 2019 1:00pm Author: Ian Forrest

  • Further fine takes the bank’s total PPI bill to £20bn.
  • In light of PPI figures and a mixed bag of results, shares react by falling 4% in early trading.
  • In our view, the shares remain a ‘hold’ for investors willing to seek a medium level of risk.

With less than a month to go before the deadline, Lloyds’ interim results showed the long-running burden of PPI mis-selling continues with the bank having to make another £550m provision in the period, taking the total to £20b. Beyond that there were some mixed figures as underlying profits were slightly better than expected while the full-year forecast for return on tangible equity was lowered from 14-15% to 12%. The dividend was raised by 5% but the bank does not expect to build its capital base as fast as previously forecast which could have implications for dividend increases in future.

The shares dropped 4% in response to the news and are trading at their lowest level since January. While there has been a late surge in PPI claims the deadline coming shortly should finally draw a line under an issue that has blighted the shares for several years. The 5% cut in costs is welcome but clearly Brexit uncertainty is weighing on what is a heavily UK-orientated bank.

Our View on Lloyds - Hold

While the prospective dividend yield of 6% is attractive for income-seekers, along with the quarterly payments, the shares are no better than a ‘hold’ for medium risk investors.

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All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

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Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.