Lloyds has revealed it has set aside £1.2 billion to cover potential compensation costs for motor finance commission arrangements, as the bank’s annual profit slid by a fifth.
An additional £700 million provision taken in the final three months of the year adds to the £450 million already confirmed last year.
The banking group is exposed to the market through its brand Black Horse, which is one of the biggest car finance providers in the UK.
In its annual results, Lloyds reported a pre-tax profit of £6 billion for 2024, a fifth lower than the £7.5 billion generated the prior year, and coming in below analysts’ expectations.
The decline was driven by lower total income for the group, higher business expenses and the higher impairment charge.
Lloyds said the extra £700 million provision was taken in light of a court judgment on the issue in October.
That found it was unlawful for car dealers to receive commission on motor finance from lenders without a customer’s informed consent.
The decision opened the door for a potential fresh wave of complaints from consumers who think they may have been mis-sold car finance in previous years.
Lloyds said that “clearly significant uncertainty remains around the final financial impact” and that it welcomes the outcome of a Supreme Court hearing set for April.
This article was written by PA Business Reporter and Anna Wise from PA Motoring Service and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.