Lloyds braces for £450m hit as FCA probes car loan charges

Lloyds Banking Group (LSE: LLOY) faces a potential £450 million bill after the UK’s financial watchdog launched an investigation into whether the lender overcharged customers on car loans. The probe, dubbed “the new PPI” by consumer champion Martin Lewis, adds uncertainty to Lloyds’ future despite a 57% jump in annual profits to £7.5 billion.

The bank, which owns Bank of Scotland and Halifax, said it couldn’t predict the outcome of the Financial Conduct Authority’s investigation, leaving investors wary. While Lloyds saw a rise in net interest income, staff bonuses dipped compared to last year, and CEO Charlie Nunn’s pay package also saw a slight decrease.

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Despite cost-cutting measures that led to over 4,600 job losses, Lloyds remains committed to digital banking initiatives and expanding its corporate and wealth divisions. However, the car loan probe adds uncertainty to Lloyds’ future prospects. Shares remained flat on Friday morning.

Key points:

  • FCA investigating potential inflated car loan charges at Lloyds.
  • Bank sets aside £450m for potential fines and compensation.
  • Annual profits surge 57% to £7.5 billion.
  • Staff bonuses and CEO pay decrease compared to previous year.
  • Lloyds shares remain flat despite record profits.