SHARES in CYBG, the group which comprises Clydesdale Bank and Yorkshire Bank, fell after the lender revealed it had set aside another £450m to cover the costs related to the misselling of payment protection insurance.

The increase means the Glasgow-based group has provided almost £1.5bn in respect of PPI misselling. This has prompted a deluge of compensation claims, which have proved very costly to administer.

The group said it has now provided £2.1bn for all legacy conduct matters. These include claims in respect of interest rate hedging products.

However, it will only have to pay £44m in respect of the increase in the provision for PPI misselling.

The remaining £406m will be paid by the group’s former owner National Australia Bank, under the terms of the demerger of CYBG it completed in February.

The demerger paved the way for CYBG to float on the stock market. It came after NAB spent months getting the business into shape for offloading but no buyers emerged for the group.

National Australia confirmed yesterday that it had plunged deep into the red in the first half as the costs of exiting the UK weighed on the business.

When the demerger completed in February Clydesdale’s chief executive David Duffy said the bank had dealt with past problems such as PPI misselling in a “very material way”.

The group has decided to increase its provision for PPI misselling by almost a third, from £1.06bn to £1.456bn.

It said the increase reflected the implications of a landmark legal victory won by widow Susan Plevin in 2014 regarding the payment of commissions to firms that sold PPI policies and which were passed on to consumers.

In October the FCA issued proposals for how lenders should respond to the case, which market watchers said would leave banks facing multi-billion pound bills in total.

In January Royal Bank of Scotland put in place a further £500m to take account of the Plevin case and the FCA’s proposal to set a 2018 deadline for PPI claims, taking the total provided by the bank to £4.3bn.

The bank took the charge in its 2015 accounts.

Lloyds Banking Group provided an additional £2.1bn for PPI misselling in the final quarter of last year, taking the total to £4bn.

Both RBS and Lloyds left their PPI provisions unchanged in the first quarter, indicating they hope to have drawn a line under a scandal that has dogged banks for years.

CYBG will take a £44m charge in its accounts for the six months to 31 March. The bank will issue these on 24 May.

The results will provide the first indication of how successful CYBG has been since regaining its independence.

Mr Duffy has said the demerger left the bank in good shape to achieve growth at the expense of bigger rivals.

Clydesdale Bank has faced big challenges dealing with PPI.

In April 2014 the bank was fined £21.7m by the FCA for complaint handling defects. In November of that year The Herald revealed the bank had recruited a large number of employees on a 24-hour shift system to process new and previously rejected PPI complaints following intervention by the watchdog. The bank still has staff working some nights, but no longer on a 24 hour system.

Under the terms of the indemnity NAB provided, CYBG was required to fund 9.7 per cent of the latest provision increase.

National Australia Bank said yesterday it lost Aus$4.22bn (£2.2bn) on the demerger and a further $800m in respect of claims under the indemnity in the six months to March. NAB lost $1.7bn in the first half but said it had performed well in its core markets. It bought Clydesdale from Midland Bank for £420m in 1987 and acquired Yorkshire Bank for around £900m in 1990.

The demerger valued CYBG at £1.6bn.

NAB said £689m of the indemnity provided to CYBG remained in place after taking account of the £404m used in respect of the latest provision.

Regarding its former parent’s results, CYBG said: “The information published by NAB does not represent the results and financial position of CYBG for the period ended 8 February 2016. It includes the results of transactions unrelated to the trading performance of CYBG.”

Shares in CYBG closed down 2.5p, at 220.5p, yesterday.

They closed up 12p at 192p after the first day’s trading in February.