Overview

• Lloyds Banking Group has increased its provision for potential compensation costs tied to a car finance mis-selling scandal to £1.2 billion, up from £450 million last year.
• The additional £700 million provision was prompted by an October Court of Appeal ruling that deemed undisclosed commissions to car dealers unlawful, significantly expanding the scope of the issue.
• The bank's pre-tax profits for 2024 fell by 20% to £6 billion, down from £7.5 billion in 2023, partly due to the increased provision for the scandal.
• Analysts estimate the broader motor finance industry could face compensation costs comparable to the £50 billion payment protection insurance scandal, with some projecting a total industry bill of over £44 billion.
• A Supreme Court hearing scheduled for April will address appeals by other lenders, with Lloyds closely monitoring the outcome due to its significant exposure through its Black Horse vehicle finance brand.