LONDON â€" Lloyds Banking Group said on Thursday that it had set aside a further £1 billion ($1.6 billion) to compensate clients who were inappropriately sold insurance.
The announcement takes Lloyds' total compensation provisions to more than £5 billion, and pushed the firm into a net loss for the third quarter of the year. The bank is part-owned by the British government after receiving a multibillion-pound bailout during the recent financial crisis.
The majority of Britain's largest banks, including HSBC, Barclays and Royal Bank of Scotland, have been forced to set aside more than a combined £10 billions to compensate clients who were inappropriately sold payment protection insurance, which covered customers if they were laid off or became ill.
On Wednesday, Barclays also announced that it had made a further £700 million provision on top of a previously-announced £1.3 billion combined figure to reimburse affected clients.< /p>
Barclays, which agreed to a $450 million settlement with the authorities in July connected to the Libor rigging scandal, also faces further legal scrutiny. On Wednesday, the U.S. Federal Energy Regulatory Commission recommended a $470 million fine related to past energy trading activities in Barclays' American operations. The bank, which has 30 days to respond to the commission, said it would defend itself against the inquiry.
Lloyds said on Thursday that despite the further £1 billion in insurance provisions, it had posted a net loss of £361 million during the three months through Sept. 30, a slight improvement on the £501 million loss in the same period last year. Without the adjustments, the British bank said its pretax profit in the third quarter doubled, to £840 million.
The bank's core Tier 1 ratio, a measure of a firm's ability to weather financial shocks, also rose slightly over the quarter, to 11.5 percent.
Shares in L loyds increased 3.5 percent in morning trading in London.
