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Lloyds records £580m loss as PPI redress bill rises £1bn

Lloyds Banking Group has reported a statutory loss of £583m for the first nine months of this year, as the bank revealed that it had set aside a further £1bn for PPI redress in the third quarter alone.

In its interim management statement, published today (1 November), the bank said that “disappointingly” legacy issues continue to affect its results and that losses were being driven by a provision of £2.1bn relating to payment protection insurance business, of which £1bn was in the third quarter.

Expected cost of contact and redress, including administration expenses, has risen to £5.3bn for the year as a whole, while costs incurred to the end of September 2012 amounted to £3.7bn.

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However, the bank added that underlying profit increased by 148 per cent to £1.9bn, mainly driven by a further decrease in the impairment charge and a continuing improvement in cost efficiency.

Lloyds emphasised that a number of uncertainties remain as to the eventual cost to the group of PPI complaints but that it should be able to offer more clarity by the time of its full year 2012 results announcement on 1 March 2013.

Lloyds also reiterated that with the onset of the Retail Distribution Review, it has undertaken “extensive market research” on customer requirements and how the market will evolve and subsequently removed its advice offer for certain low-value customers.

Customers with over £100,000 of investible assets who would benefit from holistic financial planning will be referred to its private banking service, while other clients will continue to be offered information and help with savings products on a non-advised basis.

António Horta-Osório, group chief executive, said: “We have made further significant progress this quarter, improving underlying performance in a challenging environment, while continuing to deliver returns above the cost of equity in the core business and strengthen our already robust balance sheet.

“We remain confident that, by delivering our strategy to be a simple, customer-focused UK retail and commercial bank, we can rebuild the trust of our customers and other stakeholders and can deliver sustainable returns for our shareholders over time.”