Lloyds and RBS pay price for payment protection insurance scandal

| February 19, 2012 | 0 Comments

By
Simon Watkins

Last updated at 9:14 PM on 18th February 2012

Britain’s State-owned banks plunged into the red in 2011 after paying out millions of pounds in compensation to customers for mis-sold payment protection insurance while battling to offload the remains of their toxic past.

Royal Bank of Scotland and Lloyds Banking Group report full-year results this week and both are expected to show losses.

Lloyds is forecast to have plunged to a pre-tax loss of about £4billion for 2011, compared with a £281million profit the previous year, after setting aside billions of pounds for compensation.

Hit: Lloyds is expected to report losses for 2011 after paying billions of pounds for compensation

Hit: Lloyds is expected to report losses for 2011 after paying billions of pounds for compensation

The mis-selling scandal is also the
reason why Lloyds is still trying to claw back bonuses paid to former
bosses, including chief executive Eric Daniels.

Excluding the PPI payouts and other
one-offs, the group’s underlying profits are set to be about £2billion –
lower than the previous year’s £2.2billion.

RBS also had a tough year and while
its PPI compensation payouts are much lower, it has been hit by tough
trading at its investment banking division.

Chief executive Stephen Hester has
also accelerated the sale of non-core assets built up during the
reckless boom years before the financial crisis, which has crystalised
losses.

The complexity of the bank’s
financial figures means there is a wide range of analysts’ forecasts,
with estimates of likely 2011 losses between £580million and
£1.3billion.

RBS will also confirm that its
investment banking division has set aside a bonus pool of £500million,
about half of last year’s figure.

Neither bank will release more details of pay packages until their full annual reports are published next month.

Filed Under: Latest Finance News

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