Lloyds blames flood of claims for new PPI provision of up to £1.8bn

Lloyds Banking Group says it is to take a new charge of up to £1.8bn to cover compensation claims for mis-sold payment protection insurance (PPI).

The lender said it took the provisional decision after receiving a flood of new requests for information in the days before 29 August - a deadline set by regulators in an attempt to draw a line under the scandal.

The payment protection insurance affair has cost banks more than £36bn in compensation payouts since 2011.

Lloyds announced on 31 July that it had taken a fresh charge of £550m in its second quarter - taking the amount it has set aside above £20bn in total for the first time.

Then, the bank blamed increased requests for information in the run-up to the PPI claim deadline.

It has not been alone, with RBS, CYBG and Co-op Bank also bolstering their own PPI reserves.

On Monday, Lloyds said: "In line with the broader market, the volume of PIRs (PPI information requests) received in August was higher than expected, with a significant spike in the final days before the deadline expired.

"In the final month the group received approximately 600,000 to 800,000 PIRs per week, well above the previous assumption (of 200,000)."

The statement continued: "The group also experienced an increase in direct complaints in the same period. Including claims by the Official Receiver, the Group now estimates that it will need to make an incremental charge for PPI claims, in addition to the provisions to 30 June 2019, in the range of £1.2bn to £1.8bn in its Q3 (third quarter) Interim Management Statement."

Lloyds said it was suspending the remainder of a £1.75bn share buyback scheme as a result of the provision but insisted it still planned to target a "progressive and sustainable" dividend.

Shares were more than 1% down in early deals on the FTSE 100 following the update.