Irish debt crisis hits Lloyds group

Part-nationalised Lloyds Banking Group fell back into the red today after it set aside £3.2bn (€3.5bn) to cover payment protection insurance (PPI) mis-selling claims.

The bank, which is 41% owned by the taxpayer, reported a pre-tax loss of £3.47bn (€3.8bn) in the first three months of the year, compared to a £721m (€801m) profit last year.

The larger-than-expected hit comes after the High Court last month decided new rules on the mis-selling of PPI could be applied retrospectively.

HBOS owner Lloyds is the most exposed UK bank and previously warned the ruling could be “material” for the group.

Elsewhere, the bank saw its bad debt losses increase to £2.6bn (€2.9bn), from £2.4bn (€2.7bn) in the same period last year, driven by the impact of the Irish debt crisis.