Clydesdale and Yorkshire bank set aside extra ?403m for PPI as claims rise

The Clydesdale and Yorkshire banking group (CYBG) has set aside an extra ?403m to pay for payment protection insurance (PPI) compensation, amid growing evidence of a spike in claims since this summer's ad campaign starring the disembodied head of Arnold Schwarzenegger.
The lender, which demerged from former owner National Australia Bank (NAB) and floated on the London stock exchange in February last year, gave an update on its PPI provisioning today.
Of the ?403m additional kitty, CYBG will fund 9.7pc, or ?39m, with the remainder being met by its former owner NAB. It takes the bank's remaining PPI pot to ?671m.
The bank said it had made the move on the basis of an "updated forecast" for claims it expects to have to meet between now and the deadline for PPI claims of August 2019.
The update alarmed investors, resulting in a 4pc drop in CYBG's share price to 302.8p by early afternoon trading.
Clydesdale and Yorkshire bank set aside extra ?403m for PPI as claims rise

CYBG CEO David Duffy

©Heathcliff O'Malley
While none of the major lenders upped provisions for PPI claims in their flurry of third quarter results over the past fortnight, Lloyds Banking Group did admit claims had exceeded their expectations.
PPI claims at Lloyds hit 16,000 a week following the Financial Conduct Authority's Schwarzenegger TV spots, before falling back to 11,000 a week, although this was still above the lender's assumed run-rate of 9,000.
Lloyds warned it may have to modestly increase provisioning from its existing ?2.3bn kitty if claims continue to outstrip expectations.
CYBG's executives are understood to attribute the rise in its PPI claims to a number of factors, including the Schwarzenegger campaign, increased media coverage and intensified activity by claim management companies.
In its statement CYBG said: "Based on our updated assumptions, the unutilised cover is sufficient to cover the costs of dealing with legacy conduct matters."
Further details will be provided when CYBG publishes full year results on November 21.
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