LLOYDS Banking Group has admitted it still does not know how big its final bill for mis-selling payment protection insurance will be as it warned of an uncertain UK economic outlook.

The bank set aside a further £1 billion to provide compensation for PPI mis-selling, taking its total provision for the scandal to £17bn to date. The scandal has so far cost the industry £30bn.

Lloyds chief executive Antonio Horta-Osorio told analysts that the bank has made further provision because the extension of the claims deadline until 2019 means the “outcome is not yet finalised”.

Herald View: Same old song for Lloyds on PPI

The PPI update came as Lloyds reported an underlying pre-tax profit of £1.91 billion for the three months ended September 30. That compared with £1.97bn at the same stage last year. The bank’s statutory pre-tax profit fell to £811m from £958m.

As well as accounting for PPI, Lloyds made a further provision of £150m to cover other conduct issues in the third quarter, including £100m in respect of packaged bank accounts.

“While the outcome is not yet finalised, we are taking a further provision of £1bn to cover additional operating costs and redress,” Mr Horta-Osorio on PPI said in a call with analysts.

Herald View: Same old song for Lloyds on PPI

Shares in Lloyds dipped in early trading yesterday as investors digested the news, before closing up 0.53p at 55.88p. However, that remains well adrift of the 72.15p shares were trading for on June 23, before the result of the EU referendum was known.

Laith Khalaf, senior analyst at Hargreaves Lansdown, suggested the initial drop in share price was a “bit like an over-reaction”.

While he acknowledged that the £1bn PPI charge was among “some pretty nasty stuff” in the results, he flagged that Lloyds’ guidance for the year has unchanged from when it last reported to the City shortly after the Brexit vote.

“If you look at the underlying numbers there was cause to be optimistic,” Mr Khalaf said.

“Bad debts climbed up a little bit, which again is a slightly negative note, but the bank is still profitable and it still expects to put aside a fair amount of surplus capital this year – and that means dividends for shareholders.”

Herald View: Same old song for Lloyds on PPI

Mr Horta-Osorio declared that the bank has seen “no significant impact in any of our markets” since the UK voted to leave the European Union on June 23.

He noted there is uncertainty over the economic outlook, but backed the economy to weather the post-Brexit vote fall-out. He told analysts that the majority of households and companies are in a “stronger position given the deleveraging since 2009”, noting that the unemployment rate was its lowest for 11 years and that customer mortgage debt was “less than half the value of their houses”.

Lloyds made no comment on the prospect of further branch closures yesterday, having announced in July its decision to close around 200 branches. Those closures are expected to lead to around 3,000 redundancies.

The bank yesterday welcomed the recent pledge by the UK government to sell off its remaining nine per cent stake in the bank, a legacy of the £20.1bn rescue package it received at the height of the financial crisis of 2008/09. The sell-off is expected to return £17bn to the public purse, including dividends, but there continues to be anger over the government’s decision to allow only institutional investors to take advantage of the offer.

Herald View: Same old song for Lloyds on PPI

Stockbroker Hargreaves Lansdown launched a petition yesterday asking ministers to reconsider its decision to cancel the public sale.

Mr Khalaf said: “A lot [of retail] investors were interested, and were told last October that they were to be offered the chance to buy shares at a discount with a bonus attached. There is a certain amount of frustration in that.”

Mr Horta-Osorio emphasised the strength of the bank’s capital position, with its common equity tier 1 ratio standing at 14.1 per cent at September 31, pre-dividend. This has increased from 7.1 per cent in 2010, he told analysts.

However, the bank’s defined benefit pension schemes swung from a net surplus of £430m to a net deficit of £740m.

Mr Khalaf said: “Thanks to the slightly absurd way pension liabilities are calculated, and bond yields being so volatile, defined benefit schemes currently represent a real headache for UK companies.”