The total cost of the PPI mis-selling scandal has been revised upward to £53 billion after another bank said it would need to add millions more to its PPI pot to pay out future successful claims.
CYBG – the former Clydesdale Yorkshire Bank – warned in a special statement that it may need to add another £450 million to its provision because of the unexpectedly high number of claims made in the run-up to the PPI claims deadline.
A potential £1.3 billion
With Royal Bank of Scotland (RBS) announcing that it might need to add between £600 million and £900 million, the industry has added a potential £1.35 billion just days after the deadline passed.
After the announcement, Dominic Lindsey of New City Agenda revised his firm’s previous £48.5 billion estimate to the new figure and said he believed there were even more announcements to come.
Lloyds Banking Group (LBG) increased its own provision by £½ billion just days before the deadline, but Mr Lindsey believes it may be about to announce the need for another £2 billion increase, talking its overall provision to a staggering £22 billion.
Barclays is another of the big high street banks which could be about to make an announcement which Mr Lindsey believes could be as high as another £1 billion.
When Barclays revealed its half year figures in the summer it said it believed the £360 million remaining of its provision would be enough to see it through to the deadline.
However, it also warned it would continue to monitor the number of new claims received and reserved the right to make a further increase if needed.
The Co-operative Bank has also warned of a potential hit from PPI payouts, saying it had ‘received a substantially greater volume of inquiries and complaints than expected in the final days prior to the complaint deadline’.
In its third quarter trading update at the end of July CYBG said the number of complaints received was ‘in line with the Board’s expectations’ and made no increase in its provision.
In its statement CYBG revealed it had received more than eight months’ worth of PPI information requests (PIRs) in the four weeks leading up to the deadline with 120,000 arriving in the last three days.
The scale of the announcement was underlined by a 20% drop in its share price.
Mr Lindsey said he expected the last-minute spike in PPI complaints would have ‘a significant impact on the banks when they announce their next financial results’.
Financial analyst Ian Gordon commented that it was ‘really quite shocking in terms of the anticipated damage’ as £400 million is 20% of the bank’s stock market value.