The owner of Yorkshire Bank has warned that the cost of compensating households and businesses who were mis-sold toxic or useless products could rise even further.
National Australia Bank has already set aside £811.5m to provide redress to customers and said yesterday that “significant additional provisions” are likely at the end of the year. This raises the prospect of the clean-up bill reaching £1bn.
NAB increased provisions by £245m in the third quarter to make good the mis-selling of payment protection insurance and tailored business loans.
The figures overshadowed “good progress” made by Yorkshire and Clydesdale which reported strong growth in residential mortgage lending and deposit balances and a fall in charges for bad and doubtful debts.
David Thorburn, chief executive of the UK operations, said in a statement: “There are many positives to see across the bank, however in line with the industry, we continue to deal with legacy issues.
“The way we’ve handled historic PPI complaints has not been consistent and we are committed to putting this right.
“We have already introduced a new PPI complaint handling process, and we will also apply this process to a systematic and proactive review of all past PPI complaints.
“I am confident that the changes we have made, and continue to make, are taking us toward our goal of building a strong, customer focused bank for the communities we serve.”
Mr Thorburn is the former deputy to Lynne Peacock, who was chief executive of NAB’s UK operations from 2003-2011.
The new provisions include £75m to cover the increased costs of administering the PPI remediation programme and £170m to cover the cost of mis-selling interest rate hedging products to small and medium-sized businesses.
NAB expects the new PPI complaints handling process will lead to increased payments for new complaints and in revisiting closed complaints. The City watchdog has launched an enforcement process against Clydesdale and Yorkshire banks in relation to its previous PPI complaints handling process.