I can reveal that the four largest high street lenders will signal the increased provisions in their half-year results, which kick off with Lloyds Banking Group on Thursday.
Industry sources tell me that both Lloyds and HSBC will reveal that they set aside more than their respective PPI provisions for the first quarter of £375m and £300m for the period between April and June.
Royal Bank of Scotland is expected to confirm that it is making a further allocation similar to its £125m first-quarter charge, while only Barclays is expected to allocate a smaller sum than its earlier £300m provision.
Assuming the new charges are disclosed by the banks, it would mean that Lloyds – the largest seller of PPI policies – will have had to fork out at least £4bn alone for its mis-selling activity. The total bill for the industry will have risen to almost £8bn, with analysts now anticipating that it could ultimately reach at least £10bn.
The latest financial hit underlines the grave impact of one of Britain's biggest bank mis-selling scandals, and comes amid intense political pressure for an overhaul of the industry's culture and business practices.
I revealed last night the details of an inquiry commissioned by Barclays into its business activities following its £290m fine for Libor manipulation and the enforced resignation of Bob Diamond, its chief executive. Barclays will announce the plans today.
Britain’s banks have also been forced to agree a settlement with the City regulator to provide redress to small businesses who were inappropriately sold complex hedging products, which could also cost them billions of pounds.
Today, Lord Turner, chairman of the Financial Services Authority, will cite the wave of scandals as evidence that the banking sector requires a new code of ethics that does not prioritise quick profits.
PPI policies were sold to customers to cover them in the event that they lost their jobs or became too ill to work. The major lenders were forced to admit in 2010 that millions of the policies were mis-sold.
The chief executives of the big banks have, nonetheless, lined up in recent months to criticise ambulance-chasing claims management companies for promoting a spate of fraudulent claims.
A research note published by JP Morgan, the investment bank, said: "We see potential for further provisioning for UK banks ex(cluding) StanChart on PPI. FSA’s data (updated 20 July) shows that there has been a significant uptick in the rate of PPI redress payout in May 2012.
"At the time of the Q1 results, the banks took additional provisions due to a rise in claims in Feb and March. However, …following a further rise in April, May payouts were c.60% higher than the Q112 average run rate.
"This may lead to further downside risk in terms of charges, with Lloyds, Barclays and RBS most impacted in our view…We believe that PPI is likely to remain an overhang on the domestic UK banks in the absence of further action."
Source:sky news
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