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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 starringthe disembodied head of Arnold Schwarzenegger.
The lender, which demerged from former owner National Australia Bank (NAB) and floated on the London stock exchangein 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 remainingPPI 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 betweennow 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

Credit:
Heathcliff O'Malley
While none of the major lenders upped provisions for PPI claims in theirflurry of third quarter results over the past fortnight, Lloyds Banking Group did admit claims had exceeded their expectations.
PPI claims at Lloydshit 16,000 a week following the Financial Conduct Authority'sSchwarzenegger TV spots, before falling back to 11,000 a week, although this was stillabove 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 continueto outstrip expectations.
CYBG's executives are understood to attribute the rise in its PPI claims to a numberoffactors, including the Schwarzenegger campaign, increased media coverage and intensified activity by claim management companies.
In its statementCYBG 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 whenCYBG publishes full year results on November 21.
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