LONDON (ShareCast) - (Sharecast News) - Lloyds has announced it is putting aside a further £800m to cover compensation costs related to the motor finance mis-selling scandal.
The bank said it has now made a £1.95bn provision, including both redress and operational costs, up from £1.15bn previously.

The additional measures follow the Financial Conduct Authority's ruling last week that lenders must pay out £11bn including costs after finding "widespread failings" in how motor finance firms disclosed commission payments and commercial ties between lenders and brokers on agreements signed between 6 April 2007 and 1 November 2024.

However, Lloyds said it disagrees with the methodology that the FCA used in calculating potential compensation, "which is less closely linked to actual customer loss than previous anticipated".

"The group remains committed to ensuring customers receive appropriate redress where they suffered loss, however the group does not believe that the proposed redress methodology outlined in the consultation document reflects the actual loss to the customer," Lloyds said.

Despite the increased provisions, the market reacted positively to the update on Monday, with shares up 1.4% at 84.02p by 1040 BST.

"A rising share price represents two things: one, some clarity on Lloyds' potential exposure; and two, hope that Lloyds might successfully get the regulator to tweak its proposal in its favour," said Russ Mould, investment director at AJ Bell.

With the FCA proposals still in a consultation phase, Lloyds said it will make representations to the regulator accordingly.

"The current FCA proposals remain a consultation and the ultimate outcome may evolve in response to representations made by various parties as well as further legal proceedings and complaints or any other broader implications of the Supreme Court judgment. However, the total £1.95 billion provision, including both redress and operational costs, represents the group's best estimate of the potential impact of the motor finance issue."

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