Royal Bank of Scotland will take an additional hit of up to £900 million for payment protection insurance (PPI) after a surge in claims ahead of last week’s deadline.
The Edinburgh-headquartered bank said the number of claims during August was “significantly higher than expected”, with a spike in the final days before the 29 August deadline.
RBS now expects to take a charge of between £600m and £900m for PPI in its third-quarter results. This would come on top of the £5.3 billion in provisions already set aside by the part-nationalised lender.
There has been an industry-wide rush in PPI mis-selling claims this year before the August deadline, with a flurry in the final few days.
Rival lender Santander was forced to extend its deadline for claims to be submitted after complaints its website was not working, which it said was due to high numbers of customers contacting it about PPI.
RBS’s fresh PPI charge looks set to dent its third-quarter figures after a robust first half, which saw it deliver a £1.7 billion special dividend payout for shareholders.
That followed the bank’s strongest half-year bottom-line profits in more than a decade, with attributable profits jumping 130 per cent to £2bn. But RBS made no further PPI provisions for the half-year at the time.
An estimated 64 million PPI policies were sold in the UK, many in the 1990s and early 2000s.
Shore Capital analyst Gary Greenwood noted: “The [RBS] news will no doubt raise concerns that additional top-ups may be required by other lenders, with Lloyds historically the most exposed, having already set aside £20.075bn of provisions as at 30 June 2019.”