Royal Bank of Scotland (RBS) is to add between £600 million and £900 million to its PPI pot because it fears it won’t have enough to pay out all of the successful claims against it.
The bank made the formal announcement just days after the PPI claims deadline on August 29th as it was swamped with new claims from consumers rushing to beat the time bar.
In an unscheduled statement to the Stock Market the bank said that as of June 30th it had set aside a total of £5.3 billion and then admitted that £4.9 billion had already been spent.
It made no extra provision when announcing its first half results on August 2nd, but that was before the scale of last-minute claims became apparent.
The statement continued: “The volume of claims received during August was significantly higher than expected, with a further spike in the final days leading up to the deadline of 29 August 2019.
“RBS therefore now expects to make an incremental charge for PPI claims, in addition to the provisions recorded to 30 June 2019, in the range of £600 million to £900 million in its Q3 2019 results, which takes into account claims by the Official Receiver.
“The processing of claims is ongoing and the ultimate provision recognised could be above or below this range.”
The Q3 figures will be announced on October 24th.
RBS and its sister bank NatWest were caught out by the sheer volume of last-minute claims when the online claim form on their website stopped working.
Forced to extend the deadline it said anyone who had faced a broken link could still make a claim using the special extenuating circumstances form on its website.
Third in the list
RBS has the third largest exposure to PPI mis-selling according to research by New City Agenda.
The leader, by a massive margin, is Lloyds Banking Group (LBG) which recently added £100 million to its own PPI pot to take its overall provision to £20.2 billion.
Barclays comes in at number 2 with a total pot of £9.7 billion. Announcing its half year figures at the end of July, it stated its belief that the £36 million which remained unspent would be enough to see it through to the deadline and so didn’t add any extra.
However, it did say that any surge in claims before the deadline might require a top-up at a later date.
The total paid so far in compensation is a shade over £36 billion, according to official figures from the Financial Conduct Authority (FCA), but New City Agenda believe the total will be nearer £48.5 billion and some commentators are suggesting it may eventually top £50 billion.
The final figure is unlikely to be known until the New Year after the millions of claims now in the system are finally settled.
CYBG – the former Clydesdale Yorkshire Bank – has also issued a statement saying it had experienced a ‘significant spike’ in claims.
The statement continued: “Determining the quality of the information requests received and the related financial impact will take several months.
However, the group is seeking to establish an initial cost estimate, which is expected to be material, and the group will update the market as soon as possible.”