Lloyds Shares Rise Despite Further £1bn PPI Hit

Lloyds bank has set aside a further £1 billion to meet PPI mis-selling claims, but equity analysts believe the scandal is behind the bank and are pleased with the latest results

Derya Guzel 26 October, 2016 | 5:14PM

Lloyds (LLOY) reported its third-quarter 2016 results today, showing year-to-date underlying profit at £6.1 billion, declining only 4% year over year. Following this rather good set of numbers, we opt to maintain our fair value estimate of 77p per share; meaning at current levels, shares look undervalued.

We believe the PPI scandal is largely behind the bank

With regard to payment protection insurance (PPI), Lloyds management advised that the Financial Conduct Authority proposed a deadline for compliance of June 2019. However, instead of waiting for the full outcome of the FCA decision, the bank remained on the conservative side, setting aside provisions of £1 billion to cover the additional costs. At this point, we believe the PPI scandal is largely behind the bank. It has set aside the additional provisions needed to meet the extended 2019 deadline set by the FCA, a year later than the industry originally expected.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Lloyds Banking Group PLC30.39 GBX0.93

About Author

Derya Guzel  is an Equity Analyst for Morningstar

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