Lloyds is putting aside an extra £1.2bn to £1.8bn to cover a surge in PPI claims in the run-up to last month’s deadline, taking the total bill for the mis-selling scandal to more than £20bn.
As a result, the bank will suspend a planned £1.75bn share buyback.
In the month leading up to the PPI deadline of 29 August, claims per week unexpectedly soared from around 190,000 to between 600,000 and 800,000, Lloyds said in a statement.
Lloyds follows a string of other banks that have increased their PPI provisions after a surge of interest before the deadline.
Royal Bank of Scotland said last week that it could take a further £900m hit over the claims when it releases its third-quarter results later this year.
In the last few weeks, CYBG – which owns Virgin Money, Clydesdale and Yorkshire banks – said it is setting aside an extra £450m after 340,000 customers requested information over PPI.
Co-op Bank has also said it has received a flood of requests, and Santander UK was forced to extend the deadline after its website crashed under the strain of applications.
On Monday Lloyds said it remains uncertain over the true level of PPI claims, noting: “The group continues to process [claims], and the final PPI provision could be above or below the range provided.”
Banks had complained in the past that customers were making claims even though they had never even taken out loans with them.
Lloyds had already revealed a £650m PPI charge in results for the six months to 31 July, but Monday’s announcement means that figure will now be higher.