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Wednesday 04 September, 2019


Increase in legacy PPI costs

RNS Number : 2690L
04 September 2019




LEI: 213800ZK9VGCYYR6O495




04 September 2019


CYBG PLC - increase in legacy PPI costs


Further to the statement made earlier today, the Board of CYBG PLC ("CYBG" or the "Group") is announcing that it expects to increase its provisions for legacy PPI costs by between £300m and £450m. This is primarily due to an unprecedented volume of PPI Information Requests received during August in advance of the PPI complaint deadline of 29 August 2019 and in line with the rest of the industry.


As at the end of June the Group's PPI complaint costs were tracking broadly in line with its provision assumptions, with complaints slightly elevated but at a lower uphold rate. In July, complaints increased slightly but the financial impact was not expected to be material at that stage. Subsequently the Group's Q3 Trading Update highlighted that we had recently seen a significant increase in Information Requests, but that it was too early to determine how many valid complaints would materialise.


In line with the broader industry experience, during August we received more than eight months' worth of Information Requests in one month with c.340k in aggregate over five weeks, of which c.120k of these were received in the final three days. The Group also received a sustained increase in complaints during the same period, with an average of c.5k per week during the first four weeks of August and an additional 22k complaints submitted during the final three days.


The Group can estimate the costs associated with PPI complaints received given historical uphold rates, average redress and cost-to-do assumptions. However, the key sensitivity in relation to Information Requests is the conversion rate into an upheld complaint and it is not yet possible to accurately determine the final outcome of this variable until the Group has processed more of the outstanding requests.


The Group has therefore estimated a provisional cost impact (unaudited) based on historical assumptions and an Information Request complaint conversion rate of 5% to 12% based on experience and sample testing:


Additional complaints (incl. Official Receiver):                     c.£100m

Information Request processing costs:                                  c.£100m

Information Request complaint costs range:                        c.£100m to c.£250m

                            complaint conversion rate:       5%      to        12%

Provisional legacy PPI cost estimate:                                 c.£300m to c.£450m


If the provision had been incurred as at 30 June 2019 then it would have resulted in a pro forma reduction in the Group's CET1 ratio of c.130-190 basis points, reducing it to between 13.3% and 12.7% while retaining a significant buffer in excess of its fully-loaded CRD IV minimum CET1 capital requirement of 11.0%.


The Group will now focus on working through the significant volume of Information Requests received and expects to be in a position to provide a more accurate estimate of the costs at its Full Year results on 28 November 2019. The final outcome could be above or below the estimated range above.

For further information, please contact:


Investors and Analysts

Andrew Downey

Head of Investor Relations

+44 20 3216 2694

+44 7823 443 150

[email protected]

Media (UK)

Christina Kelly

+44 7484 905 358

Senior Media Relations Manager

[email protected]

Simon Hall

+44 7855 257 081

Media Relations Manager

[email protected]

Press Office

+44 800 066 5998

[email protected]


Victoria Palmer-Moore

+44 7725 565 545

Andy Smith

+44 7872 604 889

Media (Australia)

Citadel Magnus

Peter Brookes

+61 407 911 389

James Strong

+61 448 881 174


Forward looking statements


The information contained within this document is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulation No 596/2014. Upon the publication of this document via Regulatory Information Service, this inside information is now considered to be in the public domain.


The information in this document may include forward looking statements, which are based on assumptions, expectations, valuations, targets, estimates, forecasts and projections about future events. These can be identified by the use of words such as 'expects', 'aims', 'targets', 'seeks', 'anticipates', 'plans', 'intends', 'prospects', 'outlooks', 'projects', 'forecasts' 'believes', 'estimates', 'potential', 'possible', and similar words or phrases. These forward looking statements, as well as those included in any other material discussed at any presentation, are subject to risks, uncertainties and assumptions about the Group and its securities, investments, and the environment in which it operates, including, among other things, the development of its business and strategy, any acquisitions, combinations, disposals or other corporate activity undertaken by the Group (including but not limited to the integration of the business of Virgin Money Holdings (UK) plc and its subsidiaries into the Group), trends in its operating industry, changes to customer behaviours and covenant, macroeconomic and/or geopolitical factors, changes to its  board and/ or employee  composition, exposures to terrorist activity, IT system failures, cyber-crime, fraud and pension scheme liabilities, changes to law and/or the policies and practices of the Bank of England, the FCA and/or other regulatory and governmental bodies, inflation, deflation, interest rates, exchange rates, changes in the liquidity, capital, funding and/or asset position and/or credit ratings of the Group, future capital expenditures and acquisitions, the repercussions of the UK's referendum vote to leave the European Union (EU), the UK's exit from the EU (including any change to the UK's currency), Eurozone instability, and any referendum on Scottish independence.


In light of these risks, uncertainties and assumptions, the events in the forward looking statements may not occur. Forward looking statements involve inherent risks and uncertainties. Other events not taken into account may occur and may significantly affect the analysis of the forward looking statements. No member of the Group or their respective directors, officers, employees, agents, advisers or affiliates gives any assurance that any such projections or estimates will be realised or that actual returns or other results will not be materially lower than those set out in this document and/ or discussed at any presentation. All forward looking statements should be viewed as hypothetical. No representation or warranty is made that any forward looking statement will come to pass. No member of the Group or their respective directors, officers, employees, agents, advisers or affiliates undertakes any obligation to update or revise any such forward looking statement following the publication of this document nor accepts any responsibility, liability or duty of care whatsoever for (whether in contract, tort or otherwise) or makes any representation or warranty, express or implied, as to the truth, fullness, fairness, merchantability, accuracy, sufficiency or completeness of the information in this document.


The information, statements and opinions contained in this document do not constitute or form part of, and should not be construed as, any public offer under any applicable legislation or an offer to sell or solicitation of any offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments. The distribution of this document in certain jurisdictions may be restricted by law. Recipients are required by the Group to inform themselves about and to observe any such restrictions. No liability to any person is accepted in relation to the distribution or possession of this document in any jurisdiction. The information, statements and opinions contained in this document and the materials used in and/ or discussed at, any presentation are subject to change. 


Certain figures contained in this document, including financial information, may have been subject to rounding adjustments and foreign exchange conversions. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this document may not conform exactly to the total figure given.

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