Amidst a struggling economy, Lloyds banking shares are down 10% due to record breaking compensations paid out in mis sold PPI and worries over the state of the economy in Europe.
As the bank had announced in May, £3.2bn had been set aside to cover PPI claims but in addition to that, another £.1bn was also lost. In the period ending 30 June, Lloyds recorded a total loss of £3.3bn when all was added up.
However, the decline in profits was not only due to the bank being ordered to refund mis sold PPI and to make compensation when necessary. As well, the Irish Republic’s debt crisis weighed heavily on Lloyds as losses from loans to the struggling country were greater than had been expected.
Amidst these high losses, Lloyds announced that they would need to cut as many as 15,000 positions which will also impact the UK economy. Unfortunately, since Lloyds’ merger in 2009 with Halifax Bank of Scotland (HBOS), the total number of jobs lost now stands at 43,000.
When taken into consideration that number of jobs lost in respect to the total UK workforce, that number serves a huge blow to the UK economy on the whole. The tragedy is that much might have been avoided if payment protection insurance had been ethically sold.
Reportedly, Lloyds is making the biggest settlement to consumers with the £3.2bn set aside as Barclays only set aside £1bn whilst RBS and HSBC only set aside £850m and £269 respectively. However, these losses were not the only concern amongst investors as the growing debt worries in the Eurozone are also impacting investors in the UK.
In combination with the fact that the UK economy is not righting itself quickly and that government owns 41% of Lloyds, shares fell even more quickly than forecast. With current market volatility, it could be quite a while before Lloyds and other UK banks realise a profit once again.
