SHARES in Clydesdale Bank owner CYBG were down nearly four per cent after the lender ramped up its provisions for mis-selling payment protection insurance (PPI) by several hundred million pounds.

Investors in Glasgow-based CYBG responded after the bank said it will increase provisions for “legacy conduct costs” as at September 30 by £403 million. It comes after the Financial Conduct Authority (FCA) launched an advertising campaign reminding consumers about the 2019 deadline for PPI claims in late August. The campaign sparked a fresh wave of claims.

Barclays and Lloyds Banking Group, have already made significant provisions for PPI this year as the activities of claims management firms ensures the issue remains at the forefront of consumers’ minds.

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CYBG has made provisions in the order of £2bn since the PPI scandal erupted.

The bank told the City yesterday that, under its conduct indemnity deed with National Australia Bank (NAB), which kicked in following its flotation in early 2016, it is required to fund 9.7 per cent of the extra provision. This will result in it recognising a further charge of £39m before tax in its income statement for the 12 months ended September 30.

NAB will fund the balance of the additional provisions.

CYGB, led by chief executive David Duffy, said the further provisions reflect an updated forecast of the cost of finalising the remaining cases within its PPI remediation programme. It also reflects a revised estimated of the expected level of walk-in PP claims and the cost of consumer redress between now and the August 2019 deadline. The bank said that, while the extended provision for PPI had affected its core equity tier one capital ratio by 20 basis points at September 30, its capital strength would remain “comfortably within its 12-13 per cent guidance range”.

PPI mis-selling has been one of the costliest scandals to hit the UK banking sector in recent years, with provisions across the sector totalling around £40 billion to date.

Lloyds Banking Group said last week that its balance sheet provision for PPI for the current year stood at £2.3bn at the end of September.

Reporting its third quarter results, the Bank of Scotland owner said its profits for the period were boosted with the bank having made no further provision for mis-selling PPI. This was in spite of the claims rising to 16,000 per week on the back of the FCA campaign, with the rate later receding to11,000.

At £18bn, Lloyds has made more provision for PPI than any other UK bank.

Barclays has set aside £1.9bn for PPI this year. Royal Bank has made provisions of £4.9bn in total, but nothing in its accounts so far in 2017.

CYGB said: “At 30 September 2017 CYGB has, through a combination of on-balance sheet provisions and the indemnity provided by NAB, utilised cover of £671 million for legacy conduct matters.

“CYGB considers that, following the recent completion of the past business review, the substantial completion of the remediation programme, and based on our updated assumptions, the unutilised cover is sufficient to cover the costs of dealing with legacy conduct matters.”

CYGB had previously extended its provisions for PPI by £150m in May.

As a result of the conduct indemnity deed with NAB, this resulted in an additional provision of £15m before tax.

Laith Khalaf, senior analyst at stock broker Hargreaves Lansdown, said the continuing provisions for PPI show there will be more short-term pain for the banks.

But he said that, with the 2019 deadline in sight, they can look forward to putting the “open sore” of the scandal in the “rear view mirror”

Shares in CYBG closed down 11.7p, or 3.7 per cent, at 304.1p.