The Week Ahead: Updates due from banking groups Lloyds, Barclays and Royal Bank of Scotland

Lloyds Banking Group is expected to make a further provision for PPI payoyts.
Photo: Stefan Roussea

Lloyds Banking Group is expected to make a further provision for PPI payoyts. Photo: Stefan Rousseau/PA Wire - Credit: PA

Britain’s biggest banks are expected to reveal another mammoth hit from the payment protection insurance (PPI) scandal in third quarter updates due this week, after the City watchdog announced plans in the summer to push back the deadline for claims,

Lloyds Banking Group, Barclays, Royal Bank of Scotland (RBS) and Santander are all due to post figures this week and analysts are braced for them, collectively, to put by as much as £2bn in extra PPI provisions.

The Financial Conduct Authority’s move to put a deadline on claims will draw a line under the scandal, but its cut-off date of June 2019 – instead of April 2018 as originally proposed – has drawn criticism from the industry.

Lloyds, by far the worst affected by the PPI scandal, could reveal a further charge of as much as £1.5bn when it kicks off the sector’s third quarter updates on Wednes-day, according to Citi experts.

UBS is expecting a more modest PPI top-up of £800m to cover claims up until the 2019 deadline, given that Lloyds already has £2bn in unused provisions.

Results from Lloyds will also show a pension hit following the Brexit vote, as will many of its rivals as company schemes have been hammered by falling bond yields.

Its figures come after Chancellor Philip Hammond ditched plans for a Lloyds share sale to the public earlier this month, instead planning to offload the Government’s remaining 9% stake to institutional investors.

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Barclays will reveal more PPI pain when it follows on Thursday, with Investec banking expert Ian Gordon expecting another £500m charge.

Analysts are pencilling in a 9% rise in pre-tax profits to £1.3bn from Barclays for the three months to September as the group’s investment banking arm looks set for a decent quarter.

Its Wall Street counterparts have already reported sharply higher earnings thanks to buoyant trading in fixed income, currencies and commodities since the UK’s vote to quit the EU.

Friday’s update from RBS may show some investment banking benefit, but profits are likely to be weighed down once more by restructuring and legal costs. Analysts are forecasting a loss of £231m for the third quarter, against profits of £952m a year ago.

The group has already revealed an extra PPI top-up at the half-year stage, adding an extra £450m after the claims deadline was extended.

It has been an eventful few months for RBS which has been embroiled in more controversy over its treatment of struggling businesses, seen Santander walk away from talks to buy its Williams & Glyn branches for the second time and been hit with another mis-selling settlement in the United States.

And the taxpayer-backed lender faces further hefty settlements over the mis-selling of mortgage securities in the US, with claims outstanding with the Federal Housing Finance Agency and US Department of Justice.