CYBG shares tumble as it increases PPI provision costs
CYBG shares tumbled on Thursday as it said it expects to increase its provision for legacy payment protection insurance costs by between £300m and £450m after a surge in claims ahead of the August deadline.
Banks
4,027.85
12:55 24/04/24
Barclays
192.62p
12:55 24/04/24
FTSE 100
8,088.69
12:55 24/04/24
FTSE 250
19,801.36
12:55 24/04/24
FTSE 350
4,445.14
12:55 24/04/24
FTSE All-Share
4,399.11
12:55 24/04/24
NATWEST GROUP
286.90p
12:55 24/04/24
Virgin Money UK
1,730.80p
12:54 24/04/24
The owner of Virgin Money and Clydesdale and Yorkshire Banks said late on Wednesday that the increase was due to an "unprecedented volume" of PPI information requests received last month ahead of the 29 August deadline.
"In line with the broader industry experience, during August we received more than eight months' worth of information requests in one month with circa 340k in aggregate over five weeks, of which circa 120k of these were received in the final three days," it said.
"The group also received a sustained increase in complaints during the same period, with an average of circa 5k per week during the first four weeks of August and an additional 22k complaints submitted during the final three days."
CYBG said it would likely need about £100m to cover the additional complaints and a further £100m to process information requests. In addition, it estimated £100m to £250m for the costs of any potential payouts.
At 1310 BST, CYBG shares were down 21% at 110.19p.
On Wednesday, Royal Bank of Scotland said a last minute higher-than-expected spike in claims for payment protection insurance would result in an extra charge of £600m to £900m in the third quarter.
Thomas Rosser, investment research analyst at The Share Centre, said the rush of PPI claims ahead of the August deadline would have come as no surprise to the banks, yet the severity of RBS and CYGB’s top-up charges since the second quarter hint that Barclays and Lloyds may need to add additional cover.
"With amounts set aside across the six most affected banks now exceeding £45bn since the scandal exploded, expectations of this rising further are entirely warranted.
"Yet when looking at the broader trend, PPI risk can be deemed to no longer hold material risk for banks’ solvency or payout plans. In the first five month of 2019, payouts have fallen almost 20% year-on-year. While the spike in PPI complaints may affect next year’s financial results, bigger issues for the major banks stem from the ongoing uncertainty surrounding Brexit. If investors are worried about these banks’ performance then Brexit should be of greater concern than additional PPI charges. We suspect this protracted PPI scandal is now past its peak."