PPI scandal: Customer compensation cost big lenders £31bn in three years

Tim Wallace
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Britain's five biggest banks have spent £31bn compensating customers for mis-selling and other bad behaviour over the past three years, KPMG analysts said today.

Between them the giant lenders have given customers more than £20bn in payment protection insurance mis-selling alone, and have racked up the remainder on paying interest rate swap redress, as well as the admin costs of making the assessments and payouts.

However, the redress payments are showing signs of ending – the bill this year has come to £2.4bn, down 44 per cent on the year.

As a result of the cleanup, profits should begin to grow again. The big five recorded combined earnings of £15.2bn in the first half of 2014.

“The return on equity still needs to rise above the real cost of capital, which currently stands at 12 per cent,” said KPMG’s banking head Richard McCarthy.

“Provided the economy continues to improve and regulators support the banking industry, banks are in a good position where they can start to build their business for the future.”

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