Lloyds warns PPI could cost it an extra 1.8 billion pounds

FILE PHOTO: A sign is seen outside a branch of Lloyds Bank in central London February 3, 2014. REUTERS/Luke MacGregor/File Photo

LONDON (Reuters) - Lloyds Banking Group LLOY.L will make extra provisions for payment protection insurance (PPI) claims of between 1.2 to 1.8 billion pounds ($1.47-2.21 billion) in its third quarter results and is suspending its 2019 share buyback program, it said on Monday.

Banks are setting aside more money for PPI following a rush of claims against mis-selling of the insurance, ahead of the deadline on Aug 29.

RBS RBS.L said last week it faced additional costs of up to 900 million pounds from Britain's most costly consumer insurance scandal, while Clydesdale Bank made a fresh 300-450 million pound provision.

Lloyds said the charge will dent its profitability, scrapping its guidance that it will have a return on tangible equity of around 12% this year. It also warned that its capital build in 2019 will be below its ongoing 170 to 200 basis points per annum guidance.

The PPI saga has already cost lenders more than 36 billion pounds in compensation payouts, but a surge in last minute claims is ratcheting up costs further.

Lloyds had made a provision in its second quarter results of 650 million pounds for mis-selling the insurance.

Reporting by Carolyn Cohn; Editing by Rachel Armstrong