PPI claims: bringing uncertainty to a British bank near you! Remember the frustrating old days when a cloud of uncertainty hanging over bank balance sheets was due to illiquid structured products and mortgage security holdings? When one was left to look out the window and wonder just how much of a payout would a bank ultimately get on its credit default swap protection on super-senior CDO tranches from ailing monolines? Sigh. For British banks at least, these days it's all payment protection insurance (PPI) and interest rate swap mis-selling making us wonder how bad it'll get. Things that affect actual, real people in an unsettingly direct way. Sure, there are also big ticket items, like Libor fines, but those are more multifaceted and abstract. At least Barclays can be relied upon for curveballs - the bank may have been the first to settle Libor claims with regulators on both sides of the Atlantic, but Wednesday brought the announcement of fresh investigations over its conduct in power trading and relationships with third parties that might have breached corruption rules. Huzzah! To help us keep track of the PPI story at least, analysts at Espirito Santo published the following table about a week ago: On Thursday, Lloyds announced a new PPI provision of £1bn, below what Espirito Santo was expecting. The analysts" estimates were based on the pace of the payouts and assumption that "all UK banks apply a redress payments-to-provisions ratio of 60%." The pace can be seen in this graph, which uses FSA data: As the analysts point out, payouts looked to be slowing, which could have led one to think that provisions across the industry of circa £10bn would be adequate. Barclays" announcement on October 18, that it would set aside a further £700m of provisions, seem to indicate that the fall shouldn't have been taken as a sustained trend. More colour from the team at Espirito Santo (underline theirs): We do however believe that we are a significant way through the claims process, with Lloyds suggesting that due to claims management companies, one in two claims are now bogus. This does however increase the claims processing costs for banks, which may in itself lead to higher costs than those provisioned. We believe that Lloyds, which was the first to acknowledge and provide for mis-selling, would have been targeted early by customers and claims management companies and therefore may be further than other banks in terms of claims received. Nonetheless, following Barclays announcement we expect more provisions from other banks, but especially Lloyds. Ah, good ol" uncertainty. Related links: Lloyds hit by new £1bn PPI charge - FT Barclays sets aside further £700m for PPI - FT The great mis-selling scandal - FT Video Lloyds dips toe in base-salary-only pool - FT Alphaville