UK banks face extra £1.2b bill over payment protection scandal

Britain's biggest banks are poised to set aside as much as £1.2 billion (HK$14 billion) more in the fourth quarter to compensate customers sold insurance they did not want or need, with Lloyds Banking Group hit hardest.

Lloyds, the country's largest mortgage lender, will make a £500 million provision, according to the median estimate of five analysts in a survey.

The latest charges would bring the total bill for wrongly sold payment-protection insurance to more than £23 billion over the past four years, making it the costliest of all scandals to hit the British industry since the financial crisis.

"The rate of claims in 2014 is definitely down on 2013, but it's not tailing off at the pace the banks had originally expected," said Mike Trippitt, an analyst at Numis Securities. "We've still got some meaningful provisions to come in the fourth quarter and the first half of 2015."

Predictions on the provisions for Lloyds range from £300 million by Investec analyst Ian Gordon to £622 million from Chintan Joshi at Nomura.

Barclays, Britain's second-largest bank by assets, could set aside £291 million, while Royal Bank of Scotland is seen making a £179 million provision and HSBC £140 million, according to Joshi. With Lloyds, that is an estimated total provision of £1.2 billion for the banks.