Britain's Lloyds Banking Group said today it would take an additional charge of £800m to compensate customers for the motor finance mis-selling scandal, bringing its total provision to £1.95 billion.
The lender, one of the biggest players in motor finance, had previously set aside about £1.15 billion in what is set to be one of the costliest consumer scandals for British finance.
Lloyds said the Financial Conduct Authority's (FCA) proposed redress scheme showed that more historical cases dating back to 2007 were likely eligible for compensation, and that it would seek to challenge the regulator on its methodology.
The regulator's redress calculation approach was "less closely linked to actual customer loss than previously anticipated," suggesting payouts could be higher than the bank initially modelled, Lloyds said.
Shares in the bank, which had fallen last week when it flagged a possible "material" hike in provisions, rose 1.6% in London trading.
"There is some relief today that "material" top-up didn't equate to a much larger number given that the regulator had said in their consultation that 51% of the burden would fall on banks," Benjamin Toms, an analyst at RBC, told Reuters.
Lenders will now aim to persuade the regulator to adjust the redress scheme to align more closely with customer losses and resolve discrepancies between the consultation paper and the Supreme Court ruling, he said.
Last week, the regulator proposed a redress scheme for consumers with motor finance compensation claims, estimating a total bill for lenders at about £11 billion.
Shares in lender Close Brothers, which said last week it would likely need to set aside more money for compensation, also rose today.
