Lloyds Bank set to increase motor finance provisions
Lloyds Banking Group said on Thursday morning it would “likely… be required” to hike its motor finance provisions following further updates on the regulatory redress scheme.
The FTSE 100 banking titan – which owns the UK’s largest motor finance lender Black Horse – currently leads the pack for £1.2bn in provisions.
The Financial Conduct Authority said on Tuesday it expects its redress programme to cost up to £11bn and cover 14.2m agreements dating back to 2007.
Lloyds share price jumped 3.5 per cent to 86.22 following the news, with many regarding the scheme – falling at the low end of cost expectations – a positive outcome.
But analysts have raised concerns over the “forensic” level of governance expected to be on lenders throughout the scheme as they attempt to prove their deals were not “unfair”.
Lloyds said: “Uncertainties remain outstanding on the interpretation and implementation of the proposals but based on our initial analysis and the characteristics of the proposed scheme, an additional provision is likely to be required which may be material.
“This remains subject to ongoing analysis and review of the proposals.”
Lloyds boss: No evidence of harm in car finance
The regulator has put lenders in the driving seat of the scheme, meaning overall costs could be relative to approach with administrative tasks.
Christos Doumas, director at Forvis Mazars, said: “In short, this is more than a redress exercise. It is a test of data discipline, accountability and governance across the motor finance sector, and one which provides many lessons for firms to prevent similar issues in the future.”
Earlier this year, the boss of Lloyds Banking Group, Charlie Nunn, told the Treasury Committee there was “no evidence of harm” from the firm’s operations in the car financing market.
The banker instead said the Court of Appeal’s October ruling was “at odds with 30 years of legislation”.
In August, the Supreme Court handed lenders a lukewarm win by partially overturning the judgment, but upheld the case of one claimant under “fairness” leaving the door ajar for the City watchdog’s redress scheme.