Lloyds Profits to Rise Despite PPI Compensation Increase

Lloyds Banking Group is tipped to post a pre-tax profit of more than £3bn for the first half of the year, despite increasing its payment protection insurance compensation pot, while it moves towards privatisation.

According to a raft of bank analysts, the bumper profit announcement will be made on Thursday and will be positive news for Lloyds, after it posted a loss in the same period in 2012.

Alongside other banks, such as Barclays, which are set to announce first half of the year results this week, reports say that Lloyds will be increasing its mis-selling of PPI provisions by £300m (€347m, $461m).

Lloyds declined to comment.

PPI Mis-Selling

Lloyds has already set aside the largest amount of money for PPI than any other lender at £7bn.

PPI was originally designed to provide loan repayment cover, should the customer fall ill, lose their job or have an accident. However, millions of customers complained after saying that they never wanted or needed the policy in the first place.

Overall, the Financial Services Authority revealed in March this year that UK banks have already shelled out £9bn (€10.3bn, $13.4bn) over the past two years to compensate customers mis-sold PPI.

However, this number is set to rise as the Financial Ombudsman Service revealed that they still receive 2,000 PPI complaints a day.

Most Complained About Bank in Britain

Only a few months ago, FoS revealed that Lloyds was still at the top of the list for Britain's most complained about bank as complaints surged by 274%, in the last six months of 2012.

A bulk of complaints about Lloyds TSB concerned PPI mis-selling with a total of 42,195.

Overall, the UK's largest high-street bank Lloyds Banking Group, which includes the Halifax, Lloyds TSB and Bank of Scotland, received more than 93,000 complaints in the second half of 2012, up from 27,700 in the previous six months.

Around the same time, Lloyds revealed it has employed 6,000 people to process these cases.

In June, reports surfaced that Lloyds' staff at one of its centres that handles PPI complaints, were told to 'play the system' and ignore possible fraud by the bank's salesmen.