Lloyds Banking Group has set aside £450 million to cover potential fines and compensation related to an investigation by the Financial Conduct Authority (FCA) into car loan mis-selling. The probe examines whether consumers were charged inflated prices for loans arranged between 2007 and 2021.
The provision is far lower than some analyst estimates, which suggested costs could exceed £2 billion for Lloyds. Consumer campaigner Martin Lewis had warned the investigation could become "the new PPI", referencing the payment protection insurance scandal that cost banks over £40 billion, with Lloyds alone paying more than £20 billion.
Lloyds stressed "significant uncertainty" over the extent of any misconduct or customer loss, particularly within its Black Horse motor finance division, which holds £15.3 billion in loans. The bank also noted uncertainty over when the FCA will complete its investigation.
Analysts at Jefferies estimate the industry faces a total bill of up to £13 billion, while RBC Capital forecasts £8 billion. Lloyds has the largest exposure among UK high street banks at up to £2.5 billion, followed by Santander UK (£1.1 billion) and Barclays (£357 million). Close Brothers, which suspended its dividend last week, could face a £252 million hit.
Despite the provision, Lloyds reported a 57% rise in annual pre-tax profits to £7.5 billion, boosted by a 3% increase in net interest income to £13.3 billion. The bank also announced a dividend of 1.84 pence per share and a £2 billion share buyback, which analysts said should reassure investors.
Chief executive Charlie Nunn received a £3.7 million pay package, down slightly from £3.8 million in 2022. He said the actual costs could be higher or lower than the provision, depending on how the investigation develops. The bonus pool fell to £384 million from £446 million the previous year.
