Yorkshire Bank owner has revealed an extra £350 million hit after seeing soaring payment protection insurance (PPI) claims ahead of the complaints deadline.
Shares in CYBG (Clydesdale Yorkshire Bank) fell just under five per cent after the lender said it would increase money set aside for “legacy PPI costs”, which would have an impact on its half-year results.
It said the move came after it saw the number of PPI mis-selling claims surge by more than expected in its first half to March 31, to around 59,000, as the deadline for complaints nears.
A CYBG spokesperson 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.”
The FCA has been leading a marketing push to help raise awareness of the PPI complaints deadline - with ads featuring an an animatronic model head of Arnold Schwarzenegger.
The new provision will see CYBG take a £202 million pre-tax charge on its balance sheet for the first half, as it said £148 million was covered by a conduct indemnity deed with National Australia Bank.
Banking analyst Gary Greenwood at 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.”