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More PPI and hedging woes

Clydesdale facing £500m further compensation bill

Clydesdale BankClydesdale Bank is pressing ahead with its flotation plans despite setting aside a further compensation package of up to £500 million for customers mis-sold payment protection insurance and hedging products.

The bank’s owner, National Australia Bank, was forced by the regulator in March to provide £1.7 billion in relation to “legacy conduct costs” as part of plans to float Clydesdale and Yorkshire banks.

At that time it recognised “the ongoing significant risk and uncertainty in determining costs associated with conduct-related matters as a contingent liability of the group.”

Since then, Clydesdale Bank has continued to operate its remediation programme, including progress on the past business review and any consequent need to undertake further proactive customer contact.

In a statement alongside third quarter results it said this work continues and “remains incomplete” and an additional provision of between £290m and £420m in respect of payment protection insurance will need to be recognised in the full year accounts.

It is setting aside between £60m and £80m in relation to interest rate hedging products.

NAB is expected to hand between 70% and 80% of Clydesdale shares to its own shareholders and float the remaining 20% to 30% on the stock market. It was expected to fetch around £2 billion but that valuation is yet to be determined, particularly in light of these latest provisions.

Andrew Thorburn, the NAB chief executive, said the group had made headway with its plans to float Clydesdale.

“Substantial progress has been made on our intention to pursue a demerger and initial public offering of Clydesdale Bank over the last three months and we will provide the market with a detailed update of the proposed transaction at our 2015 full-year results,” he said.

David DuffyDavid Duffy (left), recently-appointed chief cxecutive of Clydesdale and Yorkshire Banks, focused on the underlying performance of the business. He said: “In the third quarter, we have had solid earnings and strong growth in mortgage lending and customer deposits.

“We continue to focus on delivering value and improved services to our customers by investing in new digital channels and the continued regeneration of our branch network.

“I am pleased with our progress in all areas and Clydesdale Bank is positioned well to deliver on our growth ambitions”.

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