Lloyds Banking Group to dealt with another £1bn hit to cover payment protection insurance claims in a move it hopes will finally draw a line under the long-running mis-selling scandal that has hung over the lender.
The bank, which is still 9pc-owned by the taxpayer, has been the bank most affected by PPI and the latest provision takes the total amount it has set aside to handle the scandal's fall-out to around £17bn.
It was forced to take a further charge after the Financial Conduct Authority earlier this year proposed extending the deadline for PPI claims to June 2019. The £1bn hit, which was bigger than some analysts had expected, sent pre-tax profits at the bank slumping 15pc to £811m in the three months to the end of September, and the lender's shares slid as much as 3.8pc in early trading.
However, Lloyds now believes it has put hefty charges linked to the industry-wide scandal behind it.
"It would be the last big PPI provision that we would expect to take," said George Culmer, Lloyds's finance chief, adding that the charge should "absolutely" take the bank through to the 2019 deadline. On top of PPI, Lloyds took another £150m conduct provision, of which £100m related to packaged accounts.
Lloyds also confirmed speculation that, like other British companies, its pension schemes had been hammered by the bond market volatility in the wake of June's Brexit vote. While Lloyds' defined benefit plans had a £430m surplus at the end of June the schemes have now slumped to a £740m net deficit.
Boss Antonio Horta-Osorio insisted, however, that he did not think the decision to leave the European Union would affect Lloyds "very much", even though the bank is almost entirely focused on the UK.
Lloyds' numbers will be closely watched by investors as it is the first of Britain's biggest banks to post results that cover the months that followed the Brexit vote. Mr Horta-Osorio said: "We think all retail activity, including credit cards, debit cards, mortgages, so consumer activity overall, is the same following Brexit, we do not see any significant change".
However, he added that some businesses "have deferred elements in their investment plans and borrowing", a trend that started before the referendum although the Lloyds boss said the move "is significant but not very big".
Despite the slump into a pension deficit, Lloyds reported an improvement in its capital reserves, with its core tier one ratio increasing to 13.4pc from 13pc at the end of June. Investors had been concerned it could slip below 13pc, which would have put Lloyds on course to scrap a special dividend at the end of the year.
Some analysts were wary of the capital ratio increase, however, noting that it had been driven by an accounting change. Lloyds reclassified the UK government bonds it has on its balance sheet during the quarter, boosting the ratio by 80 basis points.
The bank's net interest margin, the key difference between what it pays to savers and the interest it receives from borrowers, stood at 2.69pc, better than 2.64pc it posted a year ago but down from the 2.74pc it reported at the end of June. Underlying pre-tax profits slid 3pc to £1.9bn compared with the same period a year earlier.
The Government has outlined plans to sell its remaining stake in Lloyds and ending state-ownership of the bank has been one of Mr Horta-Osorio's main priorities.
When asked whether he was considering leaving the bank, the Lloyds boss, who was hit by allegations about his private life earlier this year, said: "I like the bank, I like the brand, I like the team here and I like our strategy. There's a lot to do and that's what I'm focused on."
The lender is understood to be in talks to buy Bank of America's MBNA credit card business. However, there has been speculation that worries about the division's PPI liabilities has meant Lloyds has cooled on a deal unless BoA agrees to take on any future charges.
Mr Culmer said that "there's absolutely no way this group is going to be entertaining increases to PPI liabilities or anything like that" when asked about the MBNA deal.
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