CYBG chief executive David Duffy said yesterday payment protection insurance (PPI) woes were “in the rear view mirror” for the Clydesdale Bank owner.
Mr Duffy was speaking as CYBG, which also owns Yorkshire Bank, reported a big jump in underlying profits. The Glasgow-based group highlighted a 28% year-on-year rise for the six months to March 31, to £158million.
But sums set aside for PPI compensation and other “legacy” issues blew a large hole in the balance sheet, leaving the statutory pre-tax result in the red by £95m.
CYBG, which is in talks over a potential £1.6billion takeover of Sir Richard Branson’s Virgin Money, shouldered a £350m charge for PPI mis-selling claims ahead of next year’s complaints deadline.
The latest PPI hit – revealed last month – was only partly covered by a £148m indemnity from National Australia Bank, the group’s former owner.
CYBG’s recent PPI provision is based on a revised estimate of 110,000 future walk-in complaints between last month and August 2019, when time runs out for people hoping to cash in on the compensation bonanza.
Mr Duffy said: “Walk-in complaint volumes have been running much higher than both we and the industry expected and as a result we revised our forecasts for the level of complaints received out to the time bar in August 2019.
“While the size of the additional PPI provision charge is disappointing, it is important to note that, given the strong capital position of the group, we have been able to absorb this impact and continue to retain a significant buffer to our regulatory requirement such that our strategy and future growth aspirations remain unchanged.”
PPI was “kind of in the rear view mirror”, he said, adding that a UK Government crackdown on cold calling and other curbs on an aggressive claims industry were likely to affect the market as the deadline draws closer.
CYBG, which also unveiled plans for a new HQ yesterday, said it expected trading conditions to “remain challenging”, with slowing consumer spending and borrowing and a competitive mortgage market.
The group grew gross mortgage lending by 6% year-on-year in the first half, with overall customer lending rising to £32.7bn, from £32bn a year ago.