Lloyds profits fall 7% as it reveals more PPI pain

Lloyds Banking Group has reported a 7% fall in half-year pre-tax profits as it revealed another £550 million hit from the payment protection insurance scandal.

The lending giant said pre-tax profits dropped to a worse-than-expected £2.9 billion for the six months to June 30 after the bill for the mis-selling saga and costs such as for restructuring efforts.

The extra provision for payment protection insurance (PPI) was taken in the second quarter as claims surged ahead of the August 29 deadline, bringing its total in the half-year to £650 million – and the total for the scandal so far to a mammoth £20.1 billion.

On an underlying basis, Lloyds said pre-tax profits slipped 1% to £4.19 billion in the six months to June 30.

Lloyds chief executive Antonio Horta-Osorio said while the economy has remained resilient amid Brexit, the “continuing uncertainty is having an impact and leading to some softening in business confidence as well as in international economic indicators”.

The group also said that while longer-term targets remain unchanged, the economic uncertainty “could impact” its outlook.

But Mr Horta-Osorio added: “The group has continued to make strong strategic progress during the first half of 2019 and delivered a good financial performance.”

The results showed the bank’s retail lending business continued to come under pressure from intense competition in the mortgage market, with its net interest income – a key measure performance for banks – dropping 3% in the first half to £4.4 billion.

Its open mortgage book fell 1% to £264.9 billion, while its closed mortgage book dropped 11% to £19.8 billion.