Clydesdale and Yorkshire banking group shares fall by 6% after revealing fresh flood of 59,000 PPI complaints in just six months
- CYBG said it is setting aside a further £350m after a rise in PPI complaints
- Indemnity deed fails to cover full amount, so half-year results hit by £202m
Shares in the owner of Clydesdale and Yorkshire banks, CYBG, fell by 6 per cent this morning after the group revealed it is having to set aside millions of pounds more for ‘legacy’ payment protection insurance claims.
The FTSE 250 listed group said the additional £350million it would have to set aside after experiencing an increase in PPI complaints would hit its half-year results.
CYBG said it received 59,000 PPI complaints in the six months to 31 March, attributing the upturn to media coverage, the Financial Conduct Authority’s advertising campaign and increased activity by claims management groups.
PPI claims: Shares in the owner of Clydesdale and Yorkshire banks , CYBG, fell by 6 per cent this morning after the group announced it is setting aside extra cash for PPI complaints
The extra cash being set aside will mean CYBG will take a £202million pre-tax charge on its balance sheet for the first half. The company said the additional £148million 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.’
The group’s share price has recovered slightly and is currently down 4.07 per cent or 12.40p to 292.00p.
Looking ahead, CYBG said it expects the number of PPI complaints coming in 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.’
CYBG has been operating two PPI programmes in tandem over the past six months, namely a ‘proactive customer contact remediation exercise’ and a customer-initiated new complaints handling process.
The company said it had completed its review of all cases within the scope of its schemes, but found the process ‘more complicated and time-consuming than previously anticipated’, triggering an increase in costs.
The fallout from the PPI mis-selling scandal has cost Britain’s banks over £30billion, with approximately 60million policies mis-sold.
Consumers have until 29 August 2019 to get their PPI claim in.