Lloyds offers extra support to 2 million customers as rising costs hit hard
LONDON — Britain’s biggest lender Lloyds Banking Group contacted 2 million of its 26 million customers in May after identifying they may need additional support to cope with soaring food prices and energy and the rising cost of debt.
The UK’s biggest 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 spokesman told Reuters.
Outreach to 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.
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 had no such worries?” said Roger Gewolb , founder of the pressure group Campaign for Fair Finance, which has also called on banks to step up accessibility checks on new loans.
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.
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 balance 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.
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.
By Iain Withers and Sinead Cruise