The Royal Bank of Scotland’s (RBS) profits could take a “significant” hit this year after an influx of last-minute payment protection insurance (PPI) claims came in before the deadline at the end of August.
The bank, which had only returned to profitability recently, said it expects a charge of between £600m and £900m after receiving a "significantly higher" amount of claims last month.
To June 30, 2019, RBS had made provisions of £5.3bn for PPI claims, of which £4.9bn had been utilised.
The government, which is still RBS’s major shareholder, has been selling off blocks of the shares it owns in the bank and aims to have sold all of its stake by 2024.
PPI was designed to cover loan repayments if borrowers fell ill or lost their job, but millions of policies were sold to people who did not want or need them, mainly between 1990 and 2010.
The deadline, set by the Financial Conduct Authority (FCA) to seek compensation was August 29, prompting a surge of last-minute claims from consumers.
In a statement, RBS said: “The volume of claims received during August was significantly higher than expected, with a further spike in the final days leading up to the deadline of August 29, 2019. RBS therefore now expects to make an incremental charge for PPI claims, in addition to the provisions recorded to 30 June 2019, in the range of £600m to £900m in its Q3 2019 results.”