Lloyds Banking Group unveiled losses of £144 million in the three months to the end of September, helped by an additional £1 billion provision for the mis-selling of payment protection insurance (PPI).
Along with further provision announced in the quarterly financial statements of Barclays and the Royal Bank of Scotland (RBS) this week, it takes the total that UK banks have set aside for PPI compensation beyond £12 billion.
The bank, which is 41 per cent owned by the UK taxpayer, has now made provision for PPI of £5.3 billion. Claims are continuing to come into Lloyds and other banks and the Financial Ombudsman Service (FOS) at a high rate driven in part by the activities of claims management companies (CMC’s).
Lloyds Banking Group Chief Executive, Antonia Horta-Osorio said: "The volume of complaints received in relation to legacy PPI business during the third quarter declined when compared to the previous quarter.
"However, it remained above the level which we anticipated at the time of our half-year results and as a result the group believes it is appropriate to increase its provision for expected PPI costs by £1bn."
The FOS says that it has received half a million complaints from people who have been denied PPI compensation.
PPI was widely sold as a product designed to protect consumers ability to repay loans if they became ill or were made redundant. However, many people were mis-sold it because the product was not properly explained to them, was not suitable to them or they cpuld not claim on it because of their circumstances. In some cases they were not even told that they had purchased it.
Of the £5.3 billion set aside, Lloyds had paid out £3.7 billion by the end of September. The bank said that it could not be certain that the provision may have to be further increased in the future.
Lloyds said that half of the claims it receives from CMCs are duplicate or fake and the bank has asked the FOS to waive the £850 handling charge for dealing with false claims.
However, Craig Lowther, managing director of PPI claims company, MoneyBoomerang believes the banks are still trying to stall on paying out on valid PPI claims.
He said: "Lloyds has made a huge additional provision and yet it is not releasing any offers or showing any interest in dealing with the very valid claims it is receiving.
"We are just about to send roughly 8000 Lloyds cases to the Financial Ombudsman Service. We firmly believe these are valid claims and if so they will cost the bank millions in fines.
"The FOS upholds over 90% of cases brought again Lloyds so why is the bank stalling? The fines it is facing will add millions to the bill shareholders must weather.
"Expect more provisions to be made in the months ahead. There is still a long way to go in this mis-selling saga.
"The banks know exactly what they are liable for in terms of mis-sold PPI but they're announcing it in tranches every few months to protect their share price."
The banks have also had their hands on the money for years, lending it out at high rates of interest.
Lloyds Banking Group Chief Executive, Antonia Horta-Osorio said that it was vital that the bank dealt with the legacy of PPI before the business could be transformed.
He said the bank had "lost sight of their core values, had become complacent, non-customer focused and inefficient".
"We could not transform this business without addressing the PPI legacy," he added.
Last year, Lloyds made an annual loss of £3.5 billion, mainly as a result of the PPI scandal. Although the number of PPI claims is falling quarter-on-quarter, it is still higher than anticipated, hence the extra £1 billion provision that taints this set of quarterly financial results for the bank.
Without the PPI charge, Lloyds would have doubled its underlying profit to around £840 million. This would have been higher than most analysts expectations and is a sign that its banking strategy of cutting bad debts and reducing losses from non-core businesses is working.
It has cut its non-core assets by £30.7 billion to £110 billion so far this year and it has reigned in its international presence.
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