Updates from Britain's biggest banks expected to reveal further PPI scandal hit


Britain's biggest banks are expected to reveal another mammoth hit from the payment protection insurance (PPI) scandal in next week's third quarter updates.

The mis-selling scandal is set to dominate updates from many of the major lenders after the City watchdog announced plans in the summer to push back the deadline for PPI claims by a year to mid-2019.

Lloyds Banking Group, Barclays, Royal Bank of Scotland (RBS) and Santander are all due to post figures next week and analysts are braced for them to collectively put by as much as £2 billion in extra PPI provisions.

The industry's PPI bill is already colossal, at more than £30 billion so far.

The Financial Conduct Authority's move to put a deadline on claims will draw a line under what has been one of the biggest banking scandals in history.

But its plan to set the deadline for June 2019 - instead of the originally proposed April 2018 cut off - drew criticism from the industry.

Lloyds, which is by far the worst affected by the PPI scandal, could reveal a further charge of as much as £1.5 billion when it kicks off the sector's third quarter updates on Wednesday, according to Citi experts.

UBS is expecting a more modest PPI top-up of £800 million to cover claims up until the 2019 deadline, given that Lloyds already has £2 billion in unused provisions.

Results from Lloyds will also show a pension hit following the Brexit vote, as will many of its rivals as company schemes have been hammered by falling bond yields.

Its figures come after Chancellor Philip Hammond ditched plans for a Lloyds share sale to the public earlier this month, instead planning to offload the Government's remaining 9% stake to institutional investors.

Barclays will reveal more PPI pain when it follows on Thursday, with Investec banking expert Ian Gordon expecting another £500 million charge.

Analysts are pencilling in a 9% rise in pre-tax profits to £1.3 billion from Barclays for the three months to September as the group's investment banking arm looks set for a decent quarter.

Its Wall Street counterparts have already reported sharply higher earnings thanks to buoyant trading in fixed income, currencies and commodities since the UK's vote to quit the EU.

Friday's update from RBS may show some investment banking benefit, but profits are likely to be weighed down once more by restructuring and legal costs.

Analysts are forecasting a loss of £231 million for the third quarter, against profits of £952 million a year earlier.

The group has already revealed extra PPI top-ups at the half-year stage, adding an extra £450 million after the claims deadline was extended.

It has been an eventful few months for RBS after it has been embroiled in more controversy over its treatment of struggling businesses, saw Santander walk away from talks to buy its Williams & Glyn branches for the second time and was hit with another mis-selling settlement in the US.

The taxpayer-backed lender still faces a hefty settlement over mis-selling of mortgage securities in the US, with claims outstanding with the Federal Housing Finance Agency and US Department of Justice.