The payment protection insurance (PPI) scandal has left a final sting in the tail for Royal Bank of Scotland (RBS), as a surge in claims ahead of the 29 August deadline forced the lender to book up to £900m in additional provisions.
Although a spike in last-minute claims had been anticipated across the industry, RBS said volumes were “significantly higher than expected”, and could rise further pending further processing.
Separately, CYBG (CYBG) said it expects to announce "material" costs to cover "unprecedented volumes" of requests ahead of the deadline, although it could not yet provide an initial estimate.
Investor surprise is arguably warranted. At the end of June, RBS expected an additional 95,000 customer-initiated complaints, equivalent to 3 per cent of claims to date. Together with unprocessed claims, the lender was yet to utilise £0.4bn of its £5.3bn provisions to compensate customers miss-sold PPI products.
RBS’s decision to set aside between £600m and £900m in its third-quarter results may also concern shareholders in Lloyds Banking (LLOY) and Barclays (BARC) – the banks with the largest exposure to the scandal. Lloyds set aside another £550m provision to cover PPI claims in its second-quarter results, while Barclays made no comment on additional provisions in its half-year report.
Shares in all three lenders shrugged off the development, rising with the FTSE 100 on hopes the UK parliament might frustrate a no-deal Brexit.
