Lenders’ ability to accurately forecast the final throes of the payment protection insurance (PPI) saga have been thrown into further doubt, after CYBG (CYBG) said an “unprecedented volume” of information requests in the final days of August would force it to set aside as much as £450m.
Banking investors had already been given hints of the last-minute deluge. CYBG’s admission came soon after the Royal Bank of Scotland (RBS) announced it had set aside up to £900m of additional capital to cover a surge in claims, while Lloyds Banking Group (LLOY) – historically the most exposed lender in the mis-selling scandal – booked an extra £550m provision in its second-quarter results.
However, the impact is likely to be more pronounced on CYBG, soon to re-brand as Virgin Money UK, given the relative size of its asset base. Indeed, the lender warned that the new provision would have wiped off between 130 and 190 basis points in the group’s common equity tier-one (CET1) capital ratio at the end of June, on a pro-forma basis. Unsurprisingly, the news caused the shares to fall around a fifth, leaving them down 40 per cent since the start of the year.
CYBG said an extra £100m would be needed for additional complaints and £100m for information processing costs. Between £100m and £250m will also be diverted to “information request complaint costs”, though the lender said the difficulty in determining how likely complaints might be upheld made an accurate estimate impossible.
