Clydesdale Bank hit by new PPI blow

● ‘This will hurt’ CYBG and impact capital cushions, says leading analyst

indemnity deed with National Australia Bank at its spinoff from its parent.

Gary Greenwood, banking analyst at broker at Shore Capital, said: “Without doubt, this is a bit of a disaster for CYBG, with the original indemnity provided by National Australia Bank failing to provide the full protection that it was originally anticipated to deliver.”

Ian Gordon, banking guru at Investec, said: “This is going to hurt.” He said the latest CYBG provision for the industrywide PPI scandal had “busted through” the indemnity provided by NAB.

Gordon said the issue would slash 100 basis points off Clydesdale and Yorkshire banks capital cushions that underpin their lending, falling below the bank’s 12-13 per cent core target to a “worst in sector” forecast 11.3 per cent in the near-term.

CYBG has been operating two PPI programmes in tandem over the past six months – a “proactive customer contact remediation exercise” and a customer-initiated new complaints handling process.

The group said it had completed its review of all cases within the scope of its remediationprogramme,butfound the process “more complicated and time-consuming than previously anticipated”, which saw its costs increase.