Another £450m set aside for Clydesdale PPI payouts

The new provisions take the total cost of mis-selling various financial products at the bank to £2.1bn.

The bank’s former owner National Australia Bank (NAB) is to put up most of the cash, as per the agreement put in place prior to the lender’s recent stock market flotation.

Under the terms of the agreement, Clydesdale will pay £44m of the new £450m provision.

Clydesdale issued a statement in Glasgow to stress that the funds set aside by NAB do not reflect the performance of the Glasgow company since it became independent on 8 February.

Melbourne-based NAB announced on Thursday morning that it made a half-year loss on the back of the further £2.1bn (Aus$4.22bn) in costs associated with spinning off its British subsidiary.

NAB was required by the UK financial regulator to commit up to £1.7bn to pay the continuing costs of mis-selling after Clydesdale became independent.

It floated CYBG, which also includes the Yorkshire Bank brand, on the London and Australian stock markets in February.

Of the £1.7bn committed by NAB to its Conduct Indemnity Deed, only £689m remains to be allocated.

Having set aside £2.1bn set aside for compensation so far, only around £300m has been paid out.

The Scottish management said the accounts had been prepared under different accounting policies from those used by CYBG.

Part of the explanation for an increased amount being set aside for mis-selling compensation is a UK Supreme Court legal judgement, known as Plevin versus Paragon, which extended the definition of mis-selling.

It dealt with the case of a bank’s client not being made aware of a commission being paid for the selling of payment protection insurance.