Bank takes hit

Clydesdale shares nosedive on surge in PPI settlement claims

Clydesdale note 2

Clydesdale owner CYBG has seen a rise in claims

Shares in Clydesdale Bank parent CYBG slumped by a fifth this morning after it made a fresh £300-450 million provision to settle PPI mis-selling claims.

The bank, which also owns the Yorkshire and Virgin Money brands, said it had received an “unprecedented volume” of complaints from customers seeking compensation for mis-sold payment protection insurance (PPI) before a claims deadline on 29 August.

In August alone it had received more than eight months’ worth of Information Requests, with 340,000 in aggregate over five weeks. Some 120,000 complaints were received in the three days before the deadline.

At 4pm the shares were trading 21.5% lower at 110p after plunging to a new 12 month low of 108.3p and 58.5% down over the year.

In a statement yesterday the bank said:” “Following its Q3 trading update on 30 July 2019, the group, in line with the industry experience, received unprecedented volumes of information requests and saw a significant spike in the final days prior to the complaint deadline.”

Analysts said the additional provision could put Clydesdale’s future dividends at risk.

Jefferies said in a client note: “Given management’s credibility is challenged on PPI, investors are likely to avoid this share until results on November 28.

“Potential capital distributions are likely off the table for Full Year 2019.”

The Co-operative Bank also warned about the potential hit from payment protection insurance payouts, saying it has “received a substantially greater volume of enquiries and complaints than expected in the final days prior to the complaint deadline”.

It added: “The bank is currently assessing the impact of these increased volumes on the provision for both operational processing and redress costs. It will take several months to process the enquiries, over which time further information about the quality of the enquiries and complaints will be determined.”

Royal Bank of Scotland announced yesterday that it will make a further provision of between £600 million and £900m in its third quarter figures. It said the processing of claims is ongoing and the ultimate provision recognised could be above or below this range.

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