7:10 am, July 21, 2025
UK banks’ financial results will be in the spotlight this week as lenders await the outcome of a critical court judgment that could open the tap on car finance compensation payouts.
Lloyds Banking Group will kick off the sector’s half-year earnings with its results on Thursday, followed by NatWest Group on Friday.
It comes at a significant juncture for motor finance lenders, with the Supreme Court set to deliver a final judgment on alleged mis-selling by the end of the month.
If the UK’s Financial Conduct Authority concludes that customers have lost out from widespread failings by firms, it could set up an industry-wide redress scheme.
A recent survey from Slater & Gordon, as reported by Car Dealer, discovered that more than 23 million people expect to be win compensation for mis-sold car finance.
Lloyds has said it is setting aside £1.2bn to cover potential costs and compensation in relation to the issue, with the banking giant exposed to the market through its Black Horse business.
Santander said it had put aside £295m as a provision to cover potential payouts as well as legal costs.
Gary Greenwood, an equity analyst for Shore Capital, said he was anticipating a ‘common sense outcome’ from the Supreme Court ruling.
If firms are found to have mis-sold car loans, the ruling may allow for a proportionate redress scheme that ‘punishes the worst offenders’ but allows others to ‘get off with a lighter touch, or maybe don’t have a charge or redress at all,’ Greenwood said.
He added: ‘It’ll be painful for Lloyds, but they generate about £4bn of surplus capital every year, so it’s something that they could handle.
‘It’s the difference between something that’s annoying and a bit more annoying, rather than something that will create a systemic issue or raise severe problems for Lloyds.’
Lloyds, for example, is expected to report a pre-tax profit of £3.2bn for the first six months of the year – which would be lower than the £3.3bn made over the same period last year.
While NatWest, which is not exposed to the motor finance market, is expected to report a pre-tax operating profit of £3.5bn, which would be up on the £3bn reported this time last year.
According to The Times, Slater & Gordon has 200,000 customers interested in compensation and would back a redress scheme if the FCA introduced one, but urged the need for its to be carefully constructed.
Last month, the watchdog outlined the factors it will be using to consider implementing a formal redress scheme, and urged customers not to approach law firms.
