Finance / Clydesdale Bank braced for extra £500 million mis-selling costs
Clydesdale Bank braced for extra £500 million mis-selling costs
10 August 2015
The owner of high street lender Clydesdale said it expects to be hit by up to £500 million of extra provisions for Payment Protection Insurance (PPI) and other mis-selling scandals as it prepares for a stock market flotation later this year.
National Australia Bank (NAB) said it will set aside up to £420 million for potential PPI mis-selling fines and up to £80 million for any further charges relating to interest rate hedging products sold to small businesses.
The group said these extra costs were driven mainly by hiring more staff to process claims, reviewing older cases, and the volume of new cases.
Glasgow-based Clydesdale Bank, which also includes Yorkshire Bank and employs around 7,000 staff in 300 branches, is set to sell up to 30% of itself in a £800 million float by the end of the year.
The remainder will be held by shareholders of NAB, which has owned the Clydesdale since 1987 and the Yorkshire since 1990.
NAB said today that its unaudited cash earnings lifted by 9% to 1.75 billion dollars (£832 million) in the third quarter of the year compared to a year ago, due to improved home and business lending.
NAB group chief executive Andrew Thorburn said: “Substantial progress has also been made on our intention to pursue a demerger and initial public offering of Clydesdale Bank over the last three months and we will provide the market with a detailed update of the proposed transaction at our 2015 full year results.”
David Duffy, chief executive of Clydesdale and Yorkshire banks, said: “In the third quarter, we have had solid earnings and strong growth in mortgage lending and customer deposits.”
Clydesdale Bank was fined a record £20.7 million after it was found that thousands of PPI complaints may have been rejected unfairly in April.
NAB was ordered by the UK’s Prudential Regulation Authority in March to provide £1.7 billion capital support to the Clydesdale “in relation to potential future legacy conduct costs” ahead of its demerger and stock market float.
Prior to today, NAB had already set aside £806 million to cover the PPI scandal and £431 million for interest rate hedging.
Photo from Clydesdale Bank / PA Wire