Lloyds sets aside £1.2bn for car finance saga as profits slide

Lloyds said the extra £700 million provision was taken in light of a court judgment on the issue in October - (Getty Images)

Lloyds Banking Group has allocated £1.2 billion to address potential compensation payouts related to its motor finance commission practices, as the bank reported a 20% drop in annual profits. This comes as the group braces for the financial impact of these arrangements.

A newly announced provision of £700 million in the fourth quarter supplements the £450 million already earmarked last year, bringing the total to £1.2 billion. The bank’s exposure stems from its Black Horse brand, a major player in the UK car finance market. The provisions suggest a significant number of customers may be eligible for compensation.