Lloyds Banking Group (LON:LLOY) has put aside £100mln to compensate victims of fraud at the Reading branch of HBOS but it might need more than that if TV star Noel Edmonds gets his way.
Edmonds, the former host of 'Deal or No Deal' and 'Noel’s House Party', is seeking £73mln in compensation on claims he suffered significant economic losses and damage to his reputation as a result of the fraud. There are 64 victims involved in the case.
In a letter to Lloyds chairman, Lord Blackwell, he accused the bank of dragging its feet for the past four years in making payments to businesses that were affected by the £245mln loans scam by HBOS employees in Reading.
He claimed his media company, Unique, was “brought crashing down” as a client of former HBOS employee Mark Dobson, who was sentenced to four-and-a-half years in prison.
“No urgency whatsoever has been exhibited by your organisation to right the grievous wrongs for which it is responsible,” Edmonds said in the letter. “The victims’ group has experienced foot dragging by your organisation when it comes actually to paying out compensation which they are plainly due.”
Lloyds to make compensation payments for HBOS by end of June...
Lloyds said in a statement that it was on track to begin making its first compensation offers before the end of May and will make payments by the end of June.
The bank also said it has responded to Edmonds’ concerns and that his case was being considered as part of its review into the incident, which is being overseen independently by Professor Russell Griggs.
"The review will assess any compensation due and will provide an opportunity for customers to input directly on any aspects of their interactions with the HBOS Impaired Assets office in Reading,” Lloyds said.
The fraud involves struggling businesses that were referred by HBOS staff to a turnaround consultancy, Quayside Corporate Services, between 2002 and 2007. The businesses were then loaded up with unmanageable amounts of debt before being taken over and asset-stripped.
In February six people, including two former HBOS employees, were jailed for a total of 47 years for the fraud.
A jury heard that proceeds from the fraudulent activities were used to fund parties and buy superyachts.
Lloyds bought HBOS in 2009 after the scandal.
Mis-selling scandals hit Lloyds...
The HBOS fraud case is not the only problem hanging over Lloyds’ head.
The company has set aside more than £17bn in compensation payments for its payment protection mis-selling saga.
Last week it emerged that it also faces a £82mln hit in compensation for investors who were mis-sold investment products as “low-risk” that turned out to be complex and performed poorly.
The bank has written to 7,000 customers holding accounts with Lloyds and its investment arm, Scottish Widows, following complaints over the performance of products sold to them, including the Acorn Market Linked Deposit and Protected Capital Solutions Funds.
Government nearing completion of Lloyds' share sale...
On the bright side for Lloyds, the bank is on track to return to full private ownership as soon as this week. At Thursday's annual meeting, chief executive Antonio Horta-Osorio told shareholders that the government's remaining 0.25% stake would be sold "within days".
He said taxpayers will make at least a £500mln profit from its bailout of Lloyds. The government bought a 43% stake in Lloyds during the 2008-09 financial crisis.
"Looking at the group now it is perhaps easy to lose sight of the fact that just six years ago this was a bank in crisis," Horta-Osorio said a the meeting.
Horta-Osorio said the group has offloaded some £200bn of toxic loans acquired following its takeover of HBOS and removed more than £100bn of "cheap but very dangerous" short-term wholesale funding.
Lloyds reported its highest full year profits in a decade in February and again impressed investors in April when it revealed its first quarter profits doubled.