Lloyds offers additional support to 2 million customers as rising costs hit hard

General view of signage at a branch of Lloyds bank, in London, Britain October 31, 2021. REUTERS/Tom Nicholson

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  • 1 in 13 customers offered additional help with financial management
  • The communication campaign coincided with record inflation data in May
  • UK banks still expected to record low loan losses in H1

LONDON, July 14 (Reuters) – Britain’s biggest lender, Lloyds Banking Group, contacted 2 million of its 26 million customers in May after identifying they may need additional help to cope with the outbreak food and energy prices and the rising cost of debt.

The UK’s largest mortgage provider has presented options such as debt consolidation, household budget reviews and spending control tools to customers it says could be caught in the crosshairs of a growing cost-of-living crisis, a spokesperson told Reuters.

Raising awareness of 1 in 13 Lloyds borrowers and account holders by phone, email and text message coincided with UK inflation hitting a 40 year high and offers insight into how banks are looking to solve financial problems before they get out of hand. Read more

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Lloyds said it was unable to provide a figure for June, adding that it regularly contacts potentially vulnerable customers on a large scale.

During the COVID-19 pandemic, Lloyds arranged debt repayment holidays for 1.3 million borrowers as part of a forbearance campaign coordinated by lenders, regulators and the government.

Lloyds’ decision to anticipate an economic downturn could alarm policymakers, given that the bank is a bellwether for the UK economy.

“All banks need to worry about when and how this crisis will affect asset quality. Why would you contact 2 million customers in this way if you didn’t have such concerns?” Roger Gewolb said. , founder of the Campaign for Fair Finance pressure group, which has also called on banks to step up financial capacity checks on new borrowing.

The Bank of England warned last week that the economic outlook for Britain and the world had darkened and that lenders needed to bolster capital buffers to better weather the storm. Read more

So far, banks have insisted loan portfolios show few signs of strain. Credit Suisse analysts said they expected Lloyds to post loan loss provisions of 170 million pounds in the second quarter, broadly flat on the previous quarter.

Lloyds CEO Charlie Nunn told the BBC last week that most of his customers had less than £500 in savings – potentially exposing them to financial shocks – even though half of his customers had increased their balances during the pandemic.

Concern over the rising cost of living was reflected in the bank’s decision to issue a one-off £1,000 payment to the majority of its staff last month. Read more

Charity StepChange reported a 12% month-on-month increase in the number of new clients seeking debt advice to 14,000 in May and said cost of living was now the second most common reason often cited.

One in six households in Britain are in “serious financial difficulty”, a study published this week by abrdn Financial Fairness Trust and the University of Bristol showed, up from 1 in 10 in October.

Lukasz Krebel, an economist at the New Economics Foundation, said he welcomes initiatives by lenders to advise clients on how to restructure debts or avoid unexpected charges, but such support would only help the margin.

“Better budgeting only offers an illusory solution for individuals and families whose real incomes have fallen below what they need for basic needs,” he said.

($1 = 0.8401 pounds)

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Reporting by Iain Withers and Sinead Cruise, editing by Kirsten Donovan

Our standards: The Thomson Reuters Trust Principles.

About Lucille Thompson

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