OH, how the disembodied head of Arnold Schwarzenegger keeps coming back to haunt CYBG, owner of Clydesdale Bank.
Since the Terminator star burst on to our television sets last year in a frankly bizarre advert reminding customers of the final, 2019 deadline for PPI (payment protection insurance) claims, the UK’s major banks have been hit by a fresh wave of compensation bids. And CYBG has found itself in the thick of it.
The bank, which spun out of National Australia Bank (NAB) in 2016, announced yesterday that it has set aside a further £350 million to deal with the cost of managing PPI claims. It takes to around £2.5 billion the total provision the institution has made so far for its part in what has been one of the costliest controversies the major banks have ever become embroiled in.
So far, the Clydesdale owner’s exposure to the scandal has been limited. This has been because of a £1.7bn contract indemnity deed agreed as part of its separation from NAB, which ensured that CYBG’s former owner shared the bill for PPI charges stemming from its ownership.
However, the cover provided by that deed has now been fully utilised, meaning CYBG will have to bear the cost of any future PPI provision alone. CYBG said yesterday that the latest provision would dent its profits by £202m when it reports its interim results next month. With the bank admitting that it “now expects the current level of complaints to remain at an elevated level for a period of time”, there may be further pain in store for the institution before it can finally put this drain on resources firmly behind it.
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