Lloyds bank announced on Thursday morning that it had set aside an additional £700m in provisions for potential motor finance payouts, on top of the £450m recorded last year.

It has become the latest major lender to increase provisions in what’s becoming an increasingly expensive scandal for the UK’s financial sector.

Lloyds has announced the biggest hit. It’s set aside £1.2bn in provisions. Meanwhile, Santander has set aside £295m and Close Brothers reserving £165m.

The added provision came as Lloyds reported a £6bn pre-tax profit, missing analyst estimates of £6.5bn.

Richard Hunter, head of markets at interactive investor, said: “The remediation for the potential impact of the motor finance commission arrangements continues to overhang the stock and Lloyds took a further provision for the outcome of £700m.

“This is in addition to the £450m previously set aside, and the number had a material effect on fourth quarter profit.”

The total firms have set aside for potential payoffs now tops £1.7bn. 

Consumer claims could be over £30bn

The scandal pertains to the City regulator, the Financial Conduct Authority (FCA), which has been investigating the use of discretionary commission arrangements (DCAs).