CLYDESDALE was at the heart of a market shock yesterday when its parent, National Australia Bank, revealed that the UK operation will have to take a £420 million financial hit for redress for payment protection insurance (PPI) mis-selling.
The provision is a five-fold jump on the £75m extra provision announced in August by NAB UK, which also includes Yorkshire Bank, for the financial year just ended. It means the overall PPI hit for Clydesdale has doubled to £806m.
NAB said yesterday that the huge jump in the provision was due to a higher number of complaints going through an improved handling system at Clydesdale, covering both new and previously closed complaints.
It also cited “the need to extend our examination of historical records dating back to pre-2000 periods, including unindexed microfiche records”, and the fact that “Clydesdale Bank is subject to an enforcement process with the Financial Conduct Authority (FCA) in relation to its previous PPI complaints handling process”.
In addition, Clydesdale is also sharply increasing the amount set aside to repay small businesses that were mis-sold complex hedging rate products to £250m from the £170m announced previously – bringing the total it has set aside for that mis-selling to £430m.
David Thorburn, chief executive of Clydesdale and Yorkshire banks, admitted yesterday that it was “disappointing to have announced significant provisions for the legacy conduct issues we signalled in August”.
However, he said progress was being made by the group in “driving forward our clear commitment to fairness and investing in building a better bank for customers”.
NAB also flagged up the possibility of further mis-selling charges. “Dealing with conduct matters continues to be a significant and ongoing issue for the UK banking sector generally and there remains a wide range of uncertain factors relevant to determining the total costs associated with conduct related matters, including any possible fines,” the bank said.
One City banking analyst said: “I think this looks like Clydesdale-specific on PPI, without any real read-across to the big British banks.
“Lloyds and Barclays took what I call ‘big bath’ PPI provisions in the second trading quarter so I am not expecting anything major from them in Q3.
“Royal Bank of Scotland may take a small amount of extra provisioning, possibly £60m to £90m. The big British clearers currently look pretty adequately provided for PPI.”
Along with various other charges in technical areas such as capitalised software and research and development tax changes, NAB put out a statement in Australia saying that it expected cash earnings to come in at about A$5.1bn (£2.8bn) to A$5.2bn.
NAB chief executive Andrew Thorburn said that reporting larger UK conduct charges was “disappointing”, but that it was being “dealt with transparently and quickly and the underlying performance of the NAB Group remains strong”.
Clydesdale Bank has some 7,100 staff and 300 branches.