By Mark Kleinman, City Editor
Royal Bank of Scotland (RBS) will tomorrow set aside another £400m for the mis-selling of payment protection insurance, taking the total compensation bill for Britain's big four lenders through the £10bn mark.
I have learned that the £400m charge will be included in RBS's third-quarter results, which are otherwise expected to demonstrate the bank's continued progress towards standalone financial health.
It will, nonetheless, be the PPI provision that will dominate RBS's trading update as the spate of bank mis-selling scandals continues to cast a financial and reputational pall across the industry.
With HSBC expected to report a more modest PPI provision for the third quarter of 2012 next Monday, it will mean that:
- The two major taxpayer-backed lenders have now set aside £7bn between them since the scandal emerged following Lloyds' additional £1bn hit today.
- The third-quarter PPI bill for the big four UK banks will come in not far short of £2.5bn.
- The quartet of lenders which dominate high street banking (Barclays, HSBC, Lloyds and RBS) have now been forced to allocate £10.04bn for PPI mis-selling, with HSBC likely to add in the region of a further £150m next week. Lloyds, which had by far the largest market share, has been hit by a £5.3bn bill; Barclays' exposure is £2bn; RBS's has reached £1.7bn; and HSBC's will be approximately £1.2bn.
- Factoring in the £731m charge taken last year by Santander UK, the fifth-biggest UK lender, will take the aggregate bill so far to almost £11bn (which excludes provisions made by building societies and other smaller lenders).
Bank executives expect the pace of PPI claims to slow down in the coming months, although Lloyds chief executive Antonio Horta-Osorio said today that it was unlikely to be able to provide an estimated final bill for the bank until around the time of its full-year results in February.
Analysts and bankers now believe the total compensation charge will reach as high as £15bn, fuelled in part by the costs associated with hundreds of thousands of bogus and duplicate claims.
PPI will not be the only financial hit disclosed by RBS tomorrow. It will make a further provision of tens of millions of pounds related to the IT breakdown earlier this year which crippled millions of customer accounts.
The bank, which is 82 per cent-owned by the taxpayer, will not make a provision tomorrow for the mis-selling of interest rate swap products to small business customers because a pilot programme being run with the City regulator to discover the extent of customer redress is not yet complete.
RBS is also facing a significant penalty for Libor manipulation, but this will not be quantified for some time yet.
The bank declined to comment.
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