Northern Rock is being sold to Virgin Money for £747m, the government has announced.  The bank was nationalised in 2008 following its near collapse at the onset of the global credit crunch.  The government subsequently split the bank into two, Northern Rock plc, and Northern Rock (Asset Management), into which was placed its bad debt.  Virgin is buying Northern Rock plc and has pledged no additional compulsory redundancies for at least three years. 

The bank currently employs 2,500 people, down from 5,500 when it was nationalised.  The government said Northern Rock customers would see no change to their accounts and services and would not need to take any action.

Lloyds makes a £3.9bn loss after PPI settlements

Lloyds Banking Group has reported a £3.9bn ($6.3bn) loss for the first nine months of 2011, mainly due to the cost of settling claims for mis-selling payment protection insurance (PPI).

Lloyds said that during the nine months it spent £3.2bn covering PPI claims.

Its total income for the period also fell 15% to £15.3bn, indicating a decline in business levels.

Lloyds said its latest results came against a backdrop of a weakening UK economic environment.

It added that the cost of settling PPI claims was completed in the first half of the year.

The bank’s results come six days after it announced that chief executive Antonio Horta-Osorio is to take medical leave.

Lloyds expects Mr Horta-Osorio, who only took up the job in March, to return to his position before the end of the year.  Tim Tookey, who has taken up the chief executive role on an interim basis, said Lloyds was now continuing to strengthen its balance sheet and reduce costs.

He added: “Over time we believe our strategy will realise the full potential of our organisation for customers and shareholders.”

Mr Tookey is due to leave Lloyds in February after handing in his resignation over the summer.

The government currently still holds a 41% stake in Lloyds

Barclays has reported a 5% rise in third-quarter profits, helped by continuing cost-cutting work.

It made a pre-tax profit for the three months to 30 September of £1.34bn ($2.1bn), compared with £1.27bn for the same period last year.

Its quarterly revenues were 3% lower at £7bn in the face of “significant economic and market headwinds”.

While profits more than doubled at its UK retail banking business, they fell at its main investment banking unit.

Barclays’ UK retail banking operations made a pre-tax profit of £494m, up from £230m a year earlier, while pre-tax profits at Barclays Capital fell 49% to £388m.

‘Reassuring’

For the nine months to 30 September, the bank’s group-wide profits rose 18%.

Barclays chief executive Bob Diamond, said: “Our focus on cost reduction continues to deliver results and we are confident that we will exceed the £1bn savings target we set earlier this year.”

He added that the bank’s performance had been “reassuring” during a period of “considerable challenge and uncertainty”, which had hit Barclays Capital particularly hard.

Referring to the eurozone rescue deal agreed by European Union leaders last week, Mr Diamond said it was “calming and substantive”, but that more work had to be done.

Analyst Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “As expected, the investment banking unit has seen a significant decline in revenue, set against an erratic trading environment.

“Regulatory concerns remain a feature, even though the UK banks seem to have excused themselves from the European recapitalisation requirements.”

HSBC could find itself in trouble with the Financial Services Authority after it emerged the bank will fail to meet a deadline for clearing its backlog of payment protection insurance (PPI) mis-selling complaints.
Six banking groups, including HSBC, were given until midnight today to resolve PPI mis-selling claims that were put on hold during the long court battle over the way people’s complaints were to be assessed.
It is understood HSBC will miss the deadline because it has failed to tell all its affected customers whose claims have been successful how much compensation they are to be offered. There was speculation that another bank may be set to miss the target by a very small amount.
The FSA has already warned it is “not afraid to take tough action” against any firms that do not deal appropriately with complaints.
The six banks – HSBC, Barclays, Lloyds Banking Group, Royal Bank of Scotland, the Co-operative Bank and Egg – were granted the temporary extension by the FSA to ensure their backlogs of complaints were handled properly.

Barclays is expecting complaints about loan insurance to continue rising after a 93% increase in the first half of the year. The High Street bank said complaints about payment protection insurance (PPI) had soared after banks lost their legal challenge on PPI rules in April.
It received over 73,000 insurance complaints, mostly about PPI, up from 38,000 in the same period of 2010. “We expect PPI complaint volumes to be greater in the second half of 2011 as we see an increased number of complaints following the outcome of the judicial review,” said Barclays.
“Barclays is working hard to clear PPI complaints as quickly as possible; prioritising customers who were held up in the judicial review and resolving all complaints in a transparent and efficient manner.”
Recently, Lloyds said that insurance complaints it had received had more than doubled from 94,918 in the first six months of 2010 to 202,384 in the first half of 2011.
Barclays set £1bn aside earlier this year to meet PPI compensation costs and promised to compensate all customers who complained they had been mis-sold PPI before 20 April on a “no quibble” basis.
Insurance complaints to Barclays, mostly about PPI, rose from 38,000 in the first six months of 2010, to 59,000 in the second half of last year.
The latest figures showed these had risen again to 73,000 in the first half of 2011.

The Mortgage Verification Scheme, which comes into force from today, means that lenders can choose to pass on applicants’ details to HMRC for additional checking. If they don’t match what is written on their tax returns, they could face an investigation.

A spokesman for the Council of Mortgage Lenders, which is setting up the scheme with the Building Societies Association and HMRC, said that the scheme will “help HMRC to risk assess whether the information it has been given on applicants’ tax affairs is correct”.

The scheme, which was mentioned in last year’s Budget, aims to stop mortgage fraud. This happens when people overstate their income in order to borrow more money. This can involve forged payslips, but often involves those with more complex financial affairs and less regular incomes.

The CML spokesman said that lenders using the system as part of a pilot project had already weeded out potentially fraudulent applications because of the system. “It works both ways though,” she said. “There are people whose mortgages have been approved because of the checks – they can make lenders more confident.”

The scheme, which is voluntary, is supposed to be limited to cases where lenders reasonably suspect that mortgage fraud may be taking place. It will cost them just £14 plus VAT to refer the applicants to HMRC.

Barclays has said it will pay out compensation to everyone to whom it sold payment protection insurance and who made a complaint before 20 April.

Customers will be reimbursed the total value of all premiums plus 8% interest.

The bank said the move would affect tens of thousands of customers, particularly those put on hold during a recent judicial review.

Barclays said it was the first bank to pay out PPI compensation on a “no-quibble” basis.

It said its customers had waited long enough because of the long-running judicial review into the affair, and this would allow it to clear the backlog quickly and assess new cases more quickly.

“We can confirm that we are contacting customers whose complaint was put on hold on or before 20 April with an offer to settle their complaint in full as a gesture of goodwill,” the bank said.

Huge compensation

In April, the banking industry lost its High Court challenge to new rules on the sale of PPI.

These had been imposed last year by the Financial Services Authority (FSA) and the Financial Ombudsman Service (FOS).

Among other things, the rules require sellers of PPI polices to review all their past sales to see if their customers have a claim for mis-selling, whether or not they have actually complained.

Lloyds Banking Group set aside £3.2bn to cover the cost of this compensation, followed by Barclays (£1bn), RBS (£850m) and HSBC (£269m).

The banks put on hold tens of thousands of fresh PPI complaints that came in while they were waiting for their legal case to be resolved.

Barclays now says those lodged before 20 April will be eligible for automatic reimbursement, while those received since then will be assessed on merit.

Which? chief executive Peter Vicary-Smith welcomed Barclays’ move.

“It’s fantastic to see Barclays stepping up in this way, acknowledging their mistakes and refunding customers what they’re owed, no questions asked,” he said.

“Hopefully this will have a domino effect and other banks will follow suit,” he added.

The first quarter of this year did not bring good news for Lloyds Banking Group as it was hit by heavy losses caused by exposure to Ireland and potential refund payouts.

Lloyds reported a statutory pre-tax loss of £3.47 billion in the first three months of the year, compared to a profit of £721 million a year ago. The bank, which is 41%-owned by the British taxpayer, said its figures reflected a £3.2 billion provision made for potential refund payouts to customers who took out payment protection insurance (PPI). This follows April’s judicial review which went against the UK banks. Lloyds also took a charge of £1.1 billion to allow for further falls in commercial property prices in the Irish Republic.

The Financial Services Authority (FSA) published guidelines last year which said banks should contact all past PPI customers and invite them to complain if they thought they had been mis-sold PPI. This was challenged by the banks and spent many months going through the courts until a High Court judge rejected the challenge last month.

The results were the first presented by new Lloyds chief Antonio Horta-Osorio, who replaced Eric Daniels on 1 March. He confirmed that the bank would not be involved with any industry appeal against the ruling and its provision should “draw a line under the issue”. Its controversial acquisition of HBOS leaves the Lloyds group more exposed to PPI claims than any other in the banking sector.

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