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, announced last month, examines whether customers were overcharged due to discretionary commission arrangements that incentivised brokers to raise interest rates.
The provision was disclosed as Lloyds reported a 57% rise in pre-tax profits to £7.5 billion for 2023, exceeding expectations. The bank is considered the most exposed among major lenders, as it owns Black Horse, one of the UK's largest motor finance providers.
The FCA banned discretionary commission arrangements in 2021, estimating the move would save drivers £165 million annually. Since then, the Financial Ombudsman has received 17,000 complaints. The regulator stated that if widespread misconduct is found, it will ensure customers are compensated in an orderly manner.
Lloyds' chief financial officer, William Chalmers, downplayed comparisons to the PPI mis-selling scandal, saying the car finance probe is "not like prior remediations." Chief executive Charlie Nunn added that the extent of any misconduct remains unclear and welcomed the FCA's review for clarity.
Analysts noted the £450 million provision was lower than some feared, but questions remain about how the figure was calculated. Lloyds also faces a separate FCA investigation into its compliance with money-laundering regulations, though it said it could not yet determine any financial impact.
