CYBG raises PPI payment provision by £300-£450m after deluge of claims

CYBG, the listed owners of Leeds-headquartered Yorkshire Bank, has increased its PPI payment to provision by  between £300m-£450m after receiving more than eight months’ worth of requests in one month. 

It said that there had been an “unprecedented volume” of PPI Information Requests received during August in advance of the PPI complaint deadline of 29 August. This amounted to 340,000 claims over five weeks, of which 120,000 were received in the final three days.

As a result, it expects to increase its provisions for legacy PPI costs by between £300m and £450m. 

CYBG said: “As at the end of June the Group’s PPI complaint costs were tracking broadly in line with its provision assumptions, with complaints slightly elevated but at a lower uphold rate.

“In July, complaints increased slightly but the financial impact was not expected to be material at that stage. Subsequently the Group’s Q3 Trading Update highlighted that we had recently seen a significant increase in Information Requests, but that it was too early to determine how many valid complaints would materialise.

“In line with the broader industry experience, during August we received more than eight months’ worth of Information Requests in one month with 340,000 in aggregate over five weeks, of which 120,000 of these were received in the final three days.

“The Group also received a sustained increase in complaints during the same period, with an average of 5,000 per week during the first four weeks of August and an additional 22,000 complaints submitted during the final three days.”

 The listed firm – which is being re-branded to Virgin Money after the £1.7bn takeoever last year – said it could estimate the costs associated with PPI complaints received given historical uphold rates, average redress and cost-to-do assumptions.

CYBG added: “However, the key sensitivity in relation to Information Requests is the conversion rate into an upheld complaint and it is not yet possible to accurately determine the final outcome of this variable until the Group has processed more of the outstanding requests.”

The Group has estimated a provisional cost impact based on historical assumptions and an Information Request complaint conversion rate of 5% to 12% based on experience and sample testing:

Additional complaints (incl. Official Receiver): £100m

Information Request processing costs: £100m

Information Request complaint costs range: £100m to c.£250m

Complaint conversion rate: 5%      to        12%

Provisional legacy PPI cost estimate:  £300m to £450m