For the first quarter of the year, Lloyds recently revealed a decent underlying performance, but was not spared by the pressure from the investors over the PPI (Payment Protection Insurance) saga.
Although the Lloyds chief executive Antonio Horta-Osorio confirms a payout of £1.8bn already out of the total £3.6bn set aside for PPI compensation, the shareholders remain frustrated eager to know when the taxpayer-backed Lloyds is expected to rebuild its crushed share price.
Getting back up to acceptable profitability levels would enable the government to sell its 40 per cent stake Mr Horto-Osario mentions that though the initial plan for this is 3-5 years “The good news is that we are now 12 months further on.”
Osorio also makes the resilient statement that “We are making progress with our strategic plan within a very difficult economic and financial environment”, the Chairman Sir Win Bischoff backs him saying the group is committed to delivering “strong, stable and sustainable returns for shareholders over time” at the share holders conference on Thursday.
Mr Horta-Osario also made reference to to PPI in his introductory speech, stating: “We are focusing the group culture on producing value for money. We must move away from the industry culture of making money from products that ultimately customers do not need.”
But there are indications that the drive for profits could reflect on bank employees. A recent survey by the Unite Union told the board that 85 % of staff suffered stress, 77% were experiencing anxiety and depression whilst at work, while 74% felt that unrealistic targets were the main factor for this stress.
While employee grievances are raising and profits falling for the already dampened bank’s reputation the only good news seems to be for miss-sold PPI customers!

Payment Protection Insurance (PPI) is supposed to look after the borrowers in case of redundancy, job loss, or sudden sickness but many venal banks sold millions of policies (more than 20 million) through mortgages and loans to those who did not want, did not need, or did not know that they were paying towards PPI schemes.

To the cost of loans, these policies added between 20–50% interest rates. For instance, the Citizens Advice Bureau found that the payment protection premium for an £11,000 unsecured loan was £5,133 and a car’s £5,059 hire purchase agreement came with a £2,157 bill, and so on. Revealing the darkest side of the banks, PPI was a “protection abuse” of consumers rights, making this the scandal of a generation.

High-street banks have hoodwinked consumers by mis-selling PPI policies till 2005, the point at which the FSA starting regulating the sales of the product. FSA ruled to compensate victims after acknowledging that the rate of received complaints was increasing. Till now 1.5m consumers have made a complaint/claim with another 1.5m consumers still ignorant of their mis-sold PPI claims.
As the curtain closes for this seven year battle against banks that have been fighting courts to limit compensation, rejecting pleas of mis-sold PPI holders, or delaying to respond to customer complaints It took the Financial Ombudsman Service’s final warning for some major banks to throw in the towel by setting aside millions to pay for this losing battle.
Barclays, HSBC, and RBS backed out from the legal case concerted by the BBA (British Bankers Association) and FSA states “Today signals the end of years of poor PPI complaint handling and will trigger a dramatic improvement in the way customers are treated when making complaints”

This fatal mistake by the banks is costing them an arm and leg; banks like Lloyds, under its new chief, António Horta-Osório, set aside £3.2bn, while Barclays made an arrangement of £1bn for PPI redress. The last of the three, RBS decided to make a provision of £850m while HSBC’s profit lowers 14% after handing over £440m to settle potential claims.
Overall, the banking industry handed out £13bn in compensation for mis-selling pension schemes and at least £2.7bn for the endowment scandal. The FSA assessed in August 2010 that the cost to rectify these mistakes would be £4.5bn but analysts predict it could be twice that amount.

Money Editor, James Daley, of the organisation Which? states: “If you go to a supermarket every week, the checkout girl swears at you and the fruit’s rotten, you’ll change supermarkets. But it seems like banks can sling as much mud as they like and still keep their customers.” Also mentioning that it is a “watershed moment in how banks treat their customers” but Barclays chief Executive, Bob Diamond, expresses “We don’t always get things right for our customers; when we get them wrong, we apologise and put them right. That’s our commitment to our customers, and it applies to the way in which we will deal with PPI complaints”. While Stuart Gulliver chief executive of HSBC, on his effort to explain lower than expected charges, stressed that the bank was not “hard-assed” about its potential claims; RBS justifies this as “an important step for all UK banks in our efforts to restore the confidence and trust of consumers”.

Adding another £290m, HSBC, makes a financial retribution of £720m from its deep pockets. The FSA has already taken the bull by its horns and given a deadline until August this year to all the major banks to sort out all the mis-sold PPIs. But sadly, HSBC’s failure in reporting to customers’ complete details of their compensation reflects bad customer service.
HSBC has made substantial profits of £4.2bn from cutting 14,000 employees worldwide, with more job cuts upcoming (expected to be more than 2,200 in UK alone). Despite earning an estimated £32,000 per minute the bank has also sold its government debts, gilts, and central bank loans due to the Eurozone debt crisis.
With trouble brewing for HSBC and the FSA deadline fast approaching, the bank states that it has been sending out the “decision letters”(a notice of decision and statement of reasons for decision provided to an applicant), but some have not contained all the necessary information about redress. Chief Executive Stuart Gulliver accuses claims management companies of submitting bogus cases for people who never had a PPI policy, calling it “administrative hassle”
With HSBC promising to sort out its infringement by the end of the week, it is expected to have some leniency from the regulator. However, the Which? executive director Richard Lloyd states, “The FSA should require banks to be more transparent about their complaint-handling processes, to show they are improving the way they handle customer disputes. Anyone who thinks they were mis-sold PPI should contact their bank immediately and, if they’re not happy with the response, go to the Financial Ombudsman Service.” HSBC is out of frying pan and into the fire, with FSA closing in while its investment of £8bn loan in debt-ridden Greece goes in to political turmoil!

Barclays has set aside an extra £300m for settling claims of mis-selling payment protection insurance, but says it made an “encouraging” start to 2012.
A £2.62bn accounting adjustment and the extra PPI provision meant the bank reported a statutory pre-tax loss of £475m in the first quarter, compared with a £1.66bn profit a year ago.
But stripping out the impact of these, it made a profit of £2.45bn, which was ahead of analysts’ forecasts of £2bn.
It allowed £1bn in 2011 for PPI claims.

The bank said that profit had been driven by “strong performances in both retail and business banking and corporate and investment banking, with the non-investment bank businesses showing significant growth in adjusted profits”.
Profit at its UK retail banking arm rose 16% to £334m, while profits at Barclaycard rose 18% to £349m.
The £2.62bn debt valuation adjustment refers to a loss Barclays would make if it had to buy back its own debt now. It is an accounting technique and not a physical loss.
The increase in PPI provisions came after banks saw a steep rise in claims last year following the loss of a legal challenge over PPI rules in April.
PPI is supposed to cover borrowers’ loan repayments if they fall ill, die, or lose their jobs. But it became highly controversial and there were years of campaigning by consumer groups against the widespread mis-selling of the policies.

Lloyds Banking Group has reported falling profits and set aside an extra £375m to pay for payment protection insurance (PPI) compensation.
Pre-tax profit for the first three months of 2012 came in at £288m, down 9% from the same period last year.
Lloyds’ boss said it “reflected the subdued UK economic environment”.
Lloyds, which is 40%-owned by the government, said the extra PPI provisions were down to “the increase in the volume of complaints”.
Last week Barclays also increased its provision for PPI compensation, setting aside an extra £300m.
PPI is supposed to cover borrowers’ loan repayments if they fall ill, die, or lose their jobs. But it became highly controversial and there have been years of campaigning by consumer groups against the widespread mis-selling of the policies.
Lloyds has now set aside £3.6bn to cover compensation payments.

Having completed a review of its UK business, National Australia Bank (NAB) says it intends to simplify its business model to focus on retail operations and SME lending in Scotland and Northern England.

As a result, 29 of its financial solutions centres will close and nine will be consolidated with retail branches, with the changes predominantly taking place in the south of England.

Six back office locations will also cease to exist, putting total job losses in the region of 1,400.

The group, which operates under the Clydesdale and Yorkshire bank brands in the UK, says it will be transferring the bulk of its UK commercial real estate assets to NAB following “the recent deterioration experienced in that asset class as a result of weaker economic and operating conditions”.

Costs of £195 million will be incurred in the restructuring (£36 million in the March 2012 half year and an estimated £139 million in the September 2012 half).

Annual cost savings of approximately £74 million are expected by 2015.

NAB group chief executive officer, Cameron Clyne, comments: “The UK Banking balance sheet will be reshaped as a result of these changes, reducing the current reliance on wholesale funding and Group support and moving to a more locally deposit funded structure.”

HSBC, Europe’s biggest bank, is set to cut about 2,000 jobs in Britain on Thursday as part of its drive to slash costs and boost profitability in the face of a changing banking landscape, a person familiar with the matter said.
The cuts are part of Chief Executive Stuart Gulliver’s global revamp to cut 30,000 jobs by the end of 2013, and to streamline the bank for changes in UK regulation, people familiar with the matter said.

HSBC declined to comment.
HSBC employs about 52,000 staff in Britain, so less than 5 percent of its staff will be affected by the changes, which will affect retail banking, head office functions and other areas.

The UK economy has returned to recession, after shrinking by 0.2% in the first three months of 2012.
A sharp fall in construction output was behind the surprise contraction, the Office for National Statistics said.
A recession is defined as two consecutive quarters of contraction. The economy shrank by 0.3% in the fourth quarter of 2011.
Wednesday’s figure is an early estimate and is subject to at least two further revisions in the coming months. It is compiled using 40% of the data gathered for later revisions.
The UK economy was last in recession in 2009.

Banks paid out £1.9bn in compensation in 2011 for the mis-selling of payment protection insurance, the Financial Services Authority (FSA) has said.
Payouts accelerated towards the end of the year, with a monthly record total of £441m paid in December.
PPI was supposed to repay people’s loans if their income dropped because they fell ill or lost their jobs, but thousands were mis-sold the policies.
The figures are supplied to the FSA by 19 unnamed firms. These firms account for the vast majority of PPI cases.
Typically, successful claimants receive more than £2,750 in compensation, although some have received much bigger sums.
Most are paid compensation because they would never have been able to claim on the policy, or they were unaware that they did not have to buy the policy when they got the loan.
After losing a High Court test case in April, banks were told to deal with 200,000 complaints which they had put on hold pending the hearing’s outcome.
Further complaints that have come in since, which means the final bill for banks could reach £8bn.
Consumer groups have called on these institutions to get through the list of compensation payments quicker.
“There is too much putting off responses, too many delays for many, many people trying to get their money back for something they should never have been sold in the first place,” said Richard Lloyd of the consumers’ association Which?.
However, payments have picked up from £268m in October, and £379m in November.

Contactless technology is already available on a range of credit and debit cards.
Originally there was a limit of £10 on wave-and-go purchases. That maximum level now stands at £15 and is set to increase to £20 in June.
This is generally the kind of amount spent on debit cards, rather than credit cards, although Barclaycard is clearly encouraging customers to make more everyday purchases on a credit card. These will then be outlined on their monthly statement.
Some users may worry that a card visibly stuck to the back of their phone makes it more attractive to thieves. But if a card is used fraudulently, banks must make refunds without question.
If the card is used differently to the cardholder’s normal habits, then Barclaycard will contact the customer to check there are no security issues.
So far, contactless payment is permitted at stores including Tesco, Boots, Pret a Manger and Eat.
However, since its launch, concerns have been raised that as more people choose to use cards instead of cash, the cost to retailers increases.
The British Retail Consortium (BRC) estimates that accepting cash payments costs shops on average 1.7p per transaction, but a bank charges the shop on average about 9.2p per transaction for debit card transactions and 37.1p for credit card transactions.
The BRC has said that some shops may have to increase prices to pay the extra charges.