Three months after the PPI claims deadline on August 29th, financial firms are still increasing the amount of cash they have set aside to pay successful PPI claims.
One of the worst hit was the Shop Direct group of companies. Auditors warned that the need to find an extra £241 million for the PPI pot could put the firm out of business.
A spokesman for auditors Deloitte said: “Due to the funding gap the group and company may be unable to realise their assets and discharge their liabilities in the normal course of business”.
The news came as a shock to the firm’s investors who had already supplied £100 million in support.
The group is owned by the multi- billionaire twin brothers the Barclay brothers who were also having financial trouble with another part of their empire – the Telegraph group ofe newspapers.
The need for extra cash to pay out a surge of PPI claims just before the deadline came at a difficult time for Shop Direct.
The group was investing millions in buying stock to service the expected Christmas rush of online buying and is also investing heavily in a new warehousing project in Derby which is costing £200 million in capital spending but will eventually save the group £25 million a year.
The Barclay brothers eventually found the £150 million they needed to invest in their ailing brands with ‘an offer of an underwritten commitment for up to 100 million pounds of new notes” issued under the group’s securitisation programme’.
More big hits
The revelation that the Co-op Bank needed an extra £69 million for PPI compensation was another big hit for the troubled bank, forcing it £118.6 million into the red for the three months to September this year.
Virgin Money, bought out by the former Clydesdale and Yorkshire Bank for £1.7 billion in September, posted a £250 million loss after it announced it had added £450 million to pay out last minute PPI claims.
Overall PPI payout heading for £37 billion
The official Financial Conduct Authority (FCA) figure for PPI compensation paid to date is now a shade under £37 billion.
The regulator announced that the UK’s lenders had added £391.6 million in August to bring the overall total to £36.8 billion, of which £2.8 billion has been paid out so far in 2019 at an average of more than £⅓ billion a month.
The banks are now starting work on the mountain of last minute claims submitted before the August deadline, but they have already warned the FCA that it could be summer of next year before the huge backlog is cleared.