The owner of Clydesdale and Yorkshire banks has revealed an extra £350million hit after seeing soaring payment protection insurance (PPI) claims ahead of the complaints deadline.
Shares in Glasgow-based CYBG fell sharply after the lender said it would increase money set aside for “legacy PPI costs”, which would have an impact on its half-year results.
CYBG saw the number of PPI mis-selling claims surge by more than expected in its first half to March 31, to around 59,000.
The banking group said: “The elevated level of complaints has been driven by a combination of factors, including heightened media coverage, the FCA (Financial Conduct Authority) advertising campaign and increased activity by claims management companies.
“The group now expects the current level of complaints to remain at an elevated level for a period of time, followed by a reduction in volumes and costs as we approach the time bar in August 2019.”
FCA has been leading a major marketing push to help raise awareness of the PPI complaints deadline, including advertisements featuring an animatronic model head of Terminator star Arnold Schwarzenegger.
The new provision will see CYBG take a £202million pre-tax charge on its balance sheet for the first half, as it said £148million was covered by a conduct indemnity deed with National Australia Bank – the group’s former parent.
Banking analyst Gary Greenwood, at investment firm Shore Capital, said: “Without doubt, this is a bit of a disaster for CYBG, with the original indemnity provided by National Australia Bank failing to provide the full protection that it was originally anticipated to deliver.”
CYBG has been operating two PPI programmes in tandem over the past six months – a “proactive customer contact remediation exercise” and a customer-initiated new complaints handling process. The group said it had completed its review of all cases within the scope of its remediation programme, but found the process “more complicated and time-consuming than previously anticipated”, which saw its costs increase.
FCA re-launched its PPI claim awareness campaign earlier this month, with Schwarzenegger urging people to “do it now”.
A previous run of ads featuring the Austrian actor and former California governor helped visits to the FCA’s PPI website top one million.
