HSBC Holdings Plc (HSBA) and Barclays Plc (BARC) will set aside more than $2 billion for customers improperly sold personal-loan insurance after British banks abandoned a lawsuit to avoid paying compensation.
Barclays will set aside 1 billion pounds ($1.6 billion) in the second quarter, the London-based lender said in a statement today. HSBC, Europe’s largest bank by market value, made a $440 million provision in the first quarter, the bank said today.
The British Bankers’ Association today abandoned legal attempts to overturn a court ruling that may force the industry to pay more than 8 billion pounds ($13 billion). Lloyds Banking Group Plc (LLOY), the biggest provider of payment protection insurance, last week broke ranks with competitors and earmarked 3.2 billion pounds to settle claims with clients who bought the insurance, which covers payments on credit cards and mortgages in case of illness or unemployment.
PPI generated as much as 5.5 billion pounds in annual revenue for U.K. banks, with about 6.5 million policies sold in 2006, according to estimates by the FSA. Before the Lloyds announcement, the FSA had estimated the industry may face payouts of as much as 4.5 billion pounds.
Barclays will set aside 1 billion pounds ($1.6 billion) in the second quarter, the London-based lender said in a statement today. HSBC, Europe’s largest bank by market value, made a $440 million provision in the first quarter, the bank said today.
The British Bankers’ Association today abandoned legal attempts to overturn a court ruling that may force the industry to pay more than 8 billion pounds ($13 billion). Lloyds Banking Group Plc (LLOY), the biggest provider of payment protection insurance, last week broke ranks with competitors and earmarked 3.2 billion pounds to settle claims with clients who bought the insurance, which covers payments on credit cards and mortgages in case of illness or unemployment.
Royal Bank of Scotland Group Plc (RBS) may have to set aside 1 billion pounds, Deutsche Bank AG analyst Jason Napier said in a report to clients last week. RBS said in a statement today it was in talks with the Financial Services Authority, the country’s financial watchdog, to clarify the requirements and ensure “redress is offered in line with the standards the FSA now requires.”
RBS said last week that the cost of following Lloyds and paying compensation “could prove to be material.” It didn’t provide a figure. The lender’s share of the PPI market was about a third of Lloyds’s, according to Chief Executive Officer Stephen Hester. PPI generated as much as 5.5 billion pounds in annual revenue for U.K. banks, with about 6.5 million policies sold in 2006, according to estimates by the FSA. Before the Lloyds announcement, the FSA had estimated the industry may face payouts of as much as 4.5 billion pounds.
