The Times Harry Wilson City Editor
The Australian parent company of one of the country’s largest banks has warned that its bill for compensating customers mis-sold payment protection insurance and interest rate hedging products could rise by as much as £500 million.
National Australia Bank, the owner of Clydesdale Bank, said that the British lender could pay out an extra £420 million in PPI claims and up to £80 million in new swap redress costs as it used a third-quarter trading update to highlight the problems still facing its UK unit.
NAB is in the process of spinning out Clydesdale, which also trades under the Yorkshire Bank brand, and in March set aside £1.7 billion to cover “potential future legacy conduct costs” in an attempt to assuage the concerns of potential investors in the business.
However, yesterday it said that these compensation costs had risen and that it may have to make a new provision against PPI claims of between £290 million and £420 million, while interest rate hedging products mis-sold could require an extra £60 million to £80 million.
NAB has said for several years that it has wanted to offload Clydesdale. It is preparing a stock market flotation of the bank that could value it at up to £2 billion.
“Substantial progress has been made on our intention to pursue a demerger and IPO 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,” Andrew Thorburn, the chief executive of NAB, said.
Mr Thorburn said in May that quitting the UK was “a priority” as he set out a plan to hand up to 80 per cent of Clydesdale’s shares to NAB shareholders, while the bank would retain a stake of between 20 per cent and 30 per cent.
A month earlier, Clydesdale had been fined a record £20.7 million by the Financial Conduct Authority over its handling of as many as 100,000 PPI claims after an investigation found that the lender had given misleading information to authorities, including lying about the availability of internal records.
Clydesdale is also among the banks in line to pay tens and even hundreds of millions of pounds in compensation for mis-selling complicated interest rate derivatives to customers that left many small businesses out of pocket when interest rates sank seven years ago.
It is understood that in the past 18 months NAB has held talks with potential outside investors about selling all or part of Clydesdale, but that the discussions foundered on the issue of the size of the indemnity required to cover the cost of previous mis-selling scandals.
If floated, Clydesdale would be the lastest new banking entrant to the stock market after a series of listings by smaller lenders. Lloyds Banking Group spun out its TSB subsidiary last year, which was subsequently bought by Sabadell, of Spain.
Virgin Money, Aldermore and OneSavings are among other banks to have listed in the past year, while several more have plans to come to market.