Clydesdale in £44m charge for revised PPI

Newly independent Clydesdale and Yorkshire Bank (CYBG) said on Thursday it will recognise a pre-tax charge of £44 million in its income statement for the six months to March 31 related to a revised provision for mis-sold payment protection insurance (PPI) announced by former parent National Australia Bank (NAB).

“NAB has recognised a charge of A$801 million in connection with claims that have been, or are expected to be, made by CYBG in connection with the Conduct Indemnity Deed between CYBG and NAB effective 8 February 2016,” said CYBG in a stock market statement.

“The claims relate principally to an increase in CYBG’s provision for PPI costs of £450 million.

“Under the terms of the Conduct Indemnity Deed, CYBG is required to fund 9.7% of this provision increase, and will therefore recognise a charge of £44 million (pre-tax) in its income statement for the six month period ended 31 March 2016, with the balance being funded by NAB.

“This will impact CYBG’s CET1 ratio by approximately 20bps.”

The demerger of Clydesdale and Yorkshire Bank from former parent National Australia Bank was recently completed and CYBG now trades on the stock market as an independent company with a market value of almost £2 billion.

CYBG added in its stock market statement: “At 30 September 2015 CYBG had, through a combination of on-balance sheet provisions and the indemnity provided by NAB, total cover of £2.1 billion for legacy conduct matters.

“As at 31 March 2016 total cover had reduced by £328 million through the utilisation of provisions.

“CYBG considers that, based on our updated assumptions, the total cover remaining of £1.8 billion is sufficient to cover the costs of dealing with legacy conduct matters.”

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