Lloyds Banking Group on Monday said it expected a further hit of up to £1.8 billion to compensate clients mis-sold insurance in one of the UK banking sector’s biggest scandals.
LBG, by far the worst affected British bank in the Payment Protection Insurance crisis, said it would set aside between £1.2 billion and £1.8 billion ($1.5 billion and $2.2 billion) to meet a flurry of final claims.
With LBG payouts over PPI set to total more than £20 billion, the bank on Monday added that it was suspending a share buyback programme currently underway.
LBG and other UK banks had been inundated with client claims ahead of a deadline to seek compensation by the end of August.
“In line with the broader market, the volume… received in August was higher than expected, with a significant spike in the final days before the deadline,” LBG said in a statement.
Ahead of the deadline, UK watchdog the Financial Conduct Authority said £36 billion had been paid out in PPI compensation since the start of 2011, when banks lost a high court appeal against tighter regulation of the insurance.
While PPI was intended to cover missed payments, for example if a policy holder lost their job, in many cases consumers were unaware the insurance had been added to a product, while others would never have benefitted despite pressured into taking it.
The update from LBG comes after Royal Bank of Scotland last week said it would take an extra PPI charge of between £600 million and £900 million.