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2mo ago

Lloyds Profit Falls 36% as Motor Finance Charge Forces Guidance Cut

The drop reflects an extra £800m set aside for a proposed FCA redress scheme that lenders say is disproportionate.

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The bank has now set aside £1.95 billion to compensate customers affected by the mis-selling scandal
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Overview

  • Pre-tax profit for the quarter fell to about £1.17bn–£1.2bn after the additional charge, taking total motor finance provisions to roughly £1.95bn–£2bn.
  • Lloyds cut its expected return on tangible equity for 2025 to around 12% from 13.5% following the revised estimate of compensation costs.
  • The FCA’s consultation proposes redress on around 14.2 million car finance deals dating back to 2007, with an industry cost near £11bn and average payouts of about £700.
  • CFO William Chalmers said the methodology risks anomalous outcomes and would be challenged through the consultation, declining to rule out legal action.
  • Barclays and Close Brothers also boosted provisions and criticised the approach, while the FCA says liabilities exist and the consultation runs until 18 November.