Barclays PPI provisions soar to £2bn

How Much? Barclays Admits PPI Claims Will Cost More Than It Thought

Barclays Bank's announced today it has put aside a further £700 million to pay claims for mis-sold payment protection, taking its total claims pot to £2 billion.

The embattled bank had previously put aside £1bn in 2011 and £300m in the first quarter of 2012 to pay compensation to customers who had been mis-sold the insurance product.

In a statement on its site, Barclays said: "Barclays has experienced higher than previously anticipated levels of Payment Protection Insurance claim volumes since the end of the first half (of 2012), and has therefore determined that it is appropriate to provide a further £700m as at 30 September 2012.

"Based on claims experience to date and anticipated future volumes, the resulting provision includes Barclays best estimate of expected costs of future PPI redress. Barclays will continue to monitor actual claims volumes and the assumptions underlying the calculation of its PPI provision."

At the end of October, Barclays will announce its third quarter statement. Barclays still expects the group's adjusted profit before tax, which excludes the provision for PPI redress, for the three months ended 30 September 2012 to be broadly in line with the current market consensus of £1.7bn.

However, taking this new figure on top of the £1.1bn charge Barclays said it expected to take against the value of its own debt, the bank will now report a loss of about £100m for the three months to the end of September when it publishes its third quarter results on October 31.

Analysts had previously predicted a small top up to Barclays' PPI provisions after statistics from the financial regulator and the ombudsman indicated more PPI claims were due to be made, but £700m has exceeded everyone's expectations.

According to the Financial Ombudsman Service, Barclays topped a leaderboard of banks with the most PPI complaints over the first six months of 2012, totalling 19,522.

And data released on September 27 by the Financial Services Authority showed complaints about general insurance and pure protection had risen by 99% to 2,541,430 - 88% of which were about PPI.

Around two-thirds of all PPI complaints have been upheld, and a total of £2.9m in compensation was paid out for insurance products, including PPI, with £3.2bn of redress paid overall in the first six months of this year.

Barclays was the most complained about bank with 442,266 complaints over the six months.

Shares in the bank lost more than 2% of their value on the back of today's announcement and are currently trading down about 3% for the day, according to the Telegraph.

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