UBS reckons that Lloyds Banking Group (LON:LLOY) and peers Barclays (LON:BARC) and HSBC Holdings (LON:HSBA) are ‘increasingly likely’ to hike their costs over the payment protection insurance (PPI) scandal, Proactive Investors reports. The comments came after government-owned Royal Bank of Scotland Group (LON:RBS) booked extra PPI costs this week.
Lloyds’ share price has slipped into the red this Friday, having given up 0.67 percent to 49.70p as of 08:59 BST. The stock is currently underperforming the broader London market, with the benchmark FTSE 100 index currently standing at 7,270.97 points, flat in percentage terms.
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UBS weighs in on PPI costs
Proactive Investors quoted UBS analysts as commenting yesterday that it looked ‘fairly obvious’ to them that the broader industry experienced what the broker referred to as ‘very significant increase’ in PPI complaints last month. The comments came after RBS said this week that the volume of PPI claims received last month was ‘significantly higher’ than expected, with a further spike in the final days leading up to the deadline of August 29. CYBG meanwhile warned overnight that it expected to make a further provision of between £300 million and £450 million for the scandal.
Lloyds, which has sold more PPI policies than any of its peers, booked a fresh £550-million provision in the second quarter of the year.
Proactive Investors quoted UBS as saying that they saw “negative read-across to other UK banks, including Lloyds, Barclays and HSBC as reasonable, with updates from these banks looking increasingly likely in the light of CYBG’s announcement”.
Other analysts on Lloyds
Deutsche Bank trimmed its stance on the bailed-out lender to ‘hold’ today, also lowering its target on the Lloyds share price from 74p to 55p. According to MarketBeat, the blue-chip group currently has a consensus ‘hold’ rating and an average valuation of 66.56p.