Late PPI claims surge hits bank
THE owner of Yorkshire, Clydesdale and Virgin Money lost more than a fifth of its £2billion market value yesterday as Britain’s costliest consumer scandal provided another sting in the tail for the banking industry.
Shares in FTSE 250 challenger bank CYBG plunged 30p to 110p warning it expects to take a further hit of up to £450million on payment protection insurance (PPI) costs.
About £50million was wiped from the value of Sir Richard Branson’s Virgin Group’s 13 per cent stake.
Last-minute claims poured in after an advertising campaign featuring a robotic head of Hollywood movie star Arnold Schwarzenegger urged people who might have been mis-sold the product to act before the August 29 deadline.
CYBG said it had received an “unprecedented” eight months’ worth of PPI information requests in one month – about 340,000 over five weeks – including 120,000 in the final three days, when there were also 22,000 complaints.
It added: “The group can estimate the costs associated with complaints received given historical uphold rates and average redress. However, it is not yet possible to accurately determine the final outcome until the group has processed more of the outstanding requests.”
Investec analyst Ian Gordon described it as a “catastrophe” for CYBG, adding: “Although CYBG was known to be, proportionately, the most exposed to any late spike in PPI claims, the announcement is still really quite shocking in terms of the scale of the (anticipated) damage.”
Royal Bank of Scotland has said its final compensation bill could rise by up to £900million. The Co-op Bank said it is assessing the impact of a “substantially greater volume of enquiries and complaints than expected” in the run-up to the deadline.
Analysts at Goodbody said it was clear the Co-op’s remaining provisions of £38.7million at June 30 are “inadequate”. Lloyds Banking Group, which has set aside the largest amount at more than £20billion, declined to comment but has £1billion of unused provisions.