London this morning as the bailed-out lender lifted its provisions for the payment protection insurance (PPI) scandal, and suspended its share buyback. The update comes after bailed-out peer Royal Bank of Scotland (LON:RBS) also hiked its provision for the scandal to respond to an elevated number of claims as a regulatory deadline expired.
As of 08:24 BST, Lloyds’ share price had given up 1.91 percent to 49.08p, underperforming the broader UK market, with the benchmark FTSE 100 index having climbed into positive territory and currently standing 0.43 percent higher at 7,313.66 points. The group’s shares have given up more than 16 percent of their value over the past year, as compared with less than a one-percent fall in the Footsie.
Lloyds lifts PPI provision
Lloyds announced in a statement this morning that in line with the broader market, the amount of PPI claims received last month was higher-than-anticipated, with a significant spike in the last days before the regulatory deadline for claims. As a result, the company estimates that it needs to make an incremental charge, in addition to provisions already booked in the first six months of the year, in the range of between £1.2 billion and £1.8 billion. The bailed-out lender will take the charge in its third-quarter results statement.
“In line with its prudent approach, and the uncertainty around the final outcome for PPI, the Board has decided to suspend the remainder of the 2019 buyback programme, with c.£600 million of the up to £1.75 billion programme expected to be unused at mid-September,” Lloyds said in the statement, adding that it will consider distributing surplus capital at the end of the year.
Analysts on FTSE 100 bank
Deutsche Bank, which is ‘neutral’ on the bailed-out lender, set a target of 55p on the Lloyds share price today. According to MarketBeat, the London-listed group currently has a consensus ‘hold’ rating and an average valuation of 66.56p.