Lloyds Banking Group announces its PPI costs increase to 10 billion pounds

Lloyds Banking Group Plc reported 1.8 billion pounds in fresh provisions for the mis-selling of payment protection insurance, which made it the third British lender to announce bad news before the official start of the annual bank results season next week.

These new figures, which are practically released in an unscheduled update, take the total set aside by Lloyds Banking Group to cover its payment protection insurance mis-selling to 9.8 billion pounds and almost 20 billion pounds for the banking sector in the U.K. as a whole.

Lloyds Banking Group Plc announced that it still expected to post an underlying pre-tax profit for the full year, estimated to 6.2 billion pounds, as well as a “small” pre-tax profit on a statutory basis. It would be its first profit on this measure since 2010. Lloyds Banking Group also said that would apply to the Prudential Regulatory Authority to restart dividend payments in the period between July and December 2014, which is later than the initial expectations of analysts. The lender also explained that it had started preparing some documents for a possible future sale of shares to the public.

As a result of the financial crisis, dividend payments were suspended. Now the payouts are expected by Lloyds Banking Group to begin at a “modest” level, “with the aim of moving, over the medium term, to a dividend payout ratio of at least 50% of sustainable earnings”.

One of the analysts working in Jefferies – Joseph Dickerson, said for the Financial Times: “The modest level is disappointing to us as we had factored in a 40% payout in 2015, which looks optimistic in light of todays announcement.” As reported by the Financial Times, Citis analysts commented: “Consensus was for a small dividend in the second half of 2013 and while the target payout ratio is in line with Citi estimates, it is lower than some had anticipated.”

During the past year, the shares of Lloyds Banking Group have increased by more than 50%, but in early trading they fell by 2.4%. The Finance Director of Lloyds Banking Group – Mr. George Culmer, explained that the lender had received 2.5 million complaints from affected customers, and a further 500,000 complaints are still expected. Mr Culmer said in a statement, cited by the Financial Times: “Im as disappointed as anyone at getting it wrong again. I dont expect to put any more on top of this, but the risks remain.”

Lloyds Banking Group Plc is down 3.65% down on the day at GBP 80.260, and its one-year return rate is up 55.33%. The 26 analysts offering 12-month price targets for cited by CNNMoney have a median target of 85.00, with a high estimate of 110.00 and a low estimate of 50.00. The median estimate represents a 2.04% increase from the last close of 83.30.