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Rush of mis-selling complaints

Clydesdale takes £202m profits hit over added PPI claims

Clydesdale £5 note

Resolving claims is more complicated than anticipated

Clydesdale Bank owner CYBG said it will take a hit to profits after increasing payouts for mis-selling PPI.

The bank is setting aside a further £350 million following a rush of claims by customers.

Former owner National Australia Bank will provide £148m from an indemnity deed and CYBG will take a £202 million pre-tax charge for the six month period ended 31 March 2018.

This will erode its 12-13% capital buffer, or Common Equity Tier 1 ratio, by approximately 100 basis points.

The group has been operating two PPI programmes concurrently over the past six months and has now completed the review of all cases within the scope of the remediation programme.

It said in a statement this morning that the review of the final cases was more complicated and time-consuming than previously anticipated and, as a result, the group has increased the provision required to close-out the programme. 

With the deadline for complaints nearing, all banks have seen a rush of complaints. CYBG said this peaked in January.

About 59,000 complaints were filed in the six months to the end of March, which was higher than forecast.

“The elevated level of complaints has been driven by a combination of factors including heightened media coverage, the FCA advertising campaign and increased activity by claims management companies,” said CYBG.

It has conducted a detailed review and undertaken a “robust scenario analysis” to reassess its view of the outlook for complaint volumes.

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 ahead of the time bar in August 2019.

The £350m provision breaks down as follows: 

•           £88m in relation to the costs required to close-out the final cases investigated as part of the Group’s completed remediation programme; and

•           £186m for approximately 110,000 additional customer initiated complaints received before the August 2019 time bar; and

•           £76m for the costs of administering the redress programmes.

The group continues to maintain a significant buffer to its regulatory capital requirement and remains confident in the business delivering net capital generation.

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