Barclays (BARC.L) has become the latest bank to warn that a surge in PPI claims around the August deadline will cost it billions more than expected.
Barclays will have to set aside between £1.2bn and £1.6bn in additional cash to cover claims for the mis-sold insurance, the banks said late on Monday.
The lender blamed “a significantly higher than expected volume of PPI-related claims, enquiries, and information requests during August, with a further spike in the final days leading up to the complaints deadline.”
If claims reach the upper bound of estimates, Barclays will have spent £11.2bn on PPI redress. The bank will recognise the additional provisions in its third quarter results.
Barclays’ announcement, published after markets closed on Monday, follows speculation that it would be forced to set aside additional cash to cover claims.
The entire banking sector significantly underestimated the level of PPI claims it would receive around the 29 August deadline for historic claims.
In the last week, RBS, CYBG, the Co-op Bank, and Lloyds have all been forced to take additional charges. Barclays’ statement means HSBC and Santander are the only major banks yet to announce additional PPI costs.
“Banks have consistently and systematically failed to account properly for PPI claims,” Neil Wilson, chief market analyst at Markets.com, said on Monday.
“Shareholders should be banging down the board room doors and demanding the heads of those responsible. The other great PPI scandal is how shareholders have been consistently low-balled, fobbed off and undersold the impact of the redress, leaving them with lower capital returns and lower dividends than they would have expected.”
PPI was a form of insurance intended to help people maintain loan repayments if they fell on hard times. However, the product was aggressively marketed by banks in the 1990s and 2000s to help boost profitability. A 2011 court case ended the practice and opened the door for a wave of compensation claims from consumers.
PPI was already the most expensive banking scandal in UK history and the string of recent provisions means banks have now spent over £50bn on compensation and redress.