Lloyds Banking Group has announced a loss for the first quarter of 2011 largely because it put £3.2bn aside to cover payment protection insurance misselling claims.
In April, the UK banks, led by the British Bankers’ Association lost a judicial review over PPI and may now have to pay out large amounts in compensation.
Following the £3.2bn provision for redress, Lloyds has decided to withdraw from the BBA’s judicial review. The BBA has until May 10 to lodge an appeal.
In the bank’s interim management statement, released today, Lloyds reported a loss of £3.47bn for the first three months of year compared to a profit of £721m in the same period last year.
In the previous quarter it posted a loss of £1.6bn.
The Bank cut its loan to deposit ratio from 154 per cent in the last quarter of 2010 to 148 per cent in this quarter as customer deposits increased from £393bn to £398bn and loans fell from £592bn to £585bn.
The Banks also says it is ahead of international requirements for capital reserves by holding of 10 per cent core tier 1 capital compare to the 7 per cent required under the Basel accord.
Losses from bad loans rose to £2.6bn in the first quarter up from £2.4bn a year ago but down from £3.8bn in the previous quarter.
The statement says this is £500m more than was expected, mainly due to £1.1bn loss on Irish loans.
At 11.30am, Lloyds share price has fallen by 8.9 per cent to 52.85p from its opening price.