Lloyds Banking Group has set aside £450 million to cover potential costs from a Financial Conduct Authority (FCA) investigation into car finance deals. The probe, launched last month, examines whether customers were overcharged due to discretionary commission arrangements that allowed brokers to earn higher commissions by setting higher interest rates.
The provision was announced as Lloyds reported a 57% rise in annual pre-tax profits to £7.5 billion, exceeding expectations. The bank is considered the most exposed among major lenders due to its ownership of Black Horse, one of the UK's largest motor finance providers. The FCA banned such commission arrangements in 2021, estimating it would save drivers £165 million a year.
Lloyds chief executive Charlie Nunn said the extent of any misconduct or customer loss remains unclear, and the bank welcomes the FCA's review to provide clarity. The Financial Ombudsman has received 17,000 complaints about motor finance commission so far. Matt Britzman, equity analyst at Hargreaves Lansdown, noted the £450 million provision is less than some feared, but questions remain about how the figure was calculated.
Lloyds also disclosed a separate FCA investigation into its compliance with money-laundering rules, though it cannot yet determine the financial impact. The bank forecasts 'lowish' but positive UK economic growth this year, while acknowledging some customers struggle with inflation and higher mortgage costs.
