(^) Daily Mail, Friday, September 6, 2019
City Editor: Alex Brummer http://www.thisismoney.co.uk Business Editor: Ruth Sunderland
City Finance
£1.2 billion
amount pulled out of UK
equity funds in July due to
Brexit uncertainty
by Lucy White
BANKS have been ham-
mered by a rush of last-
minute PPI claims that will
cost them an extra £17bn.
The deluge of compensation
demands lodged before the
August 29 cut-off date is
expected to bring lenders’
total bill to more than £50bn.
The previous running estimate
was put at £36bn, with analysts
saying the final cost was ‘well
beyond people’s expectations’.
As the Co-op Bank became the
latest bank to warn of a late
spike in claims, shares in Clydes-
dale Bank owner CYBG crashed
by more than 21pc after it
revealed it had been hit with
nearly 10,000 per day in the
weeks before the deadline.
It came just a day after state-
backed Royal Bank of Scotland
said it was having to lock away up
to £900m more to cover the stam-
pede of claims it was also facing.
Dominic Lindley of think-tank
New City Agenda said the final
rush before the deadline meant
lenders were likely to have to put
aside £53bn overall – £17bn more
than previously thought.
CYBG said it received 340,000
PPI compensation claims in the
five weeks running up to the
August deadline. It is expected
to cost between £300m and
£450m, on top of the £2.67bn it
had already set aside.
Ian Gordon, banking analyst at
Investec, said the admission was
‘really quite shocking in terms of
the anticipated damage’.
‘The numbers are much, much
worse than the market was
expecting,’ he said.
The turmoil saw its shares
plunge 21.4pc, or 29.95p, lower to
110p, wiping £263m off the value
of a 13pc stake owned by Sir
Richard Branson.
Co-op Bank said it had received
a flood of additional claims and
said it would end up costing more
than the £540.3m it had already
accounted for.
PPI, or payment protection
insurance, was designed to cover
loan repayments if borrowers fell
ill or lost their job. But many PPI
products were sold to borrowers
who did not want or need them.
Bank customers were encour-
aged to submit a PPI claim even
if they didn’t know whether they
bought it. Gordon declared: ‘I’m
reasonably confident that it’s
been the worst single-issue value
destruction of all time.’
Banks have so far paid out £36bn,
with an average payout of £2,000
per person. The Financial Con-
duct Authority set a deadline of
August 29 to encourage potential
victims to submit their claims,
publicising it with adverts featur-
ing a likeness of the character
Arnold Schwarzenegger played in
The Terminator (pictured). But
many in the industry have com-
plained the claims process has
been wringing the lenders dry.
Tushar Morzaria, Barclays’ chief
financial officer, last month
claimed the lender was getting
thousands of ‘vexatious’ claims via
management companies on behalf
of people who did not even bank
with them. Another bank boss
told the Mail at least 90pc of PPI
claims are fake, and of the 10pc
which aren’t, many had not been
victims of mis-selling. Barclays
and Lloyds declined to comment.
■ BuSINeSS Secretary Andrea
Leadsom has urged banks to
keep lending to smaller compa-
nies after Brexit.
Melrose sales
soar to £5.7bn
THe turnaround specialist that
owns GKN has narrowed its losses.
Melrose reported a loss of £128m
for the six months to June 30, down
from £372m during the same period
last year.
Sales rose from £2.8bn to £5.7bn,
following its takeover of the British
engineering group.
Melrose’s strategy to overhaul the
firm was ‘progressing well’ and it is
pumping record investment into
the aerospace division.
The firm, which goes by the man-
tra ‘buy, improve, sell’, bought GKN
in an £8.1bn hostile takeover last
year. Its bid was only allowed after it
promised not to sell GKN’s aero-
space arm without approval from
the Government.
earlier this week it said 1,000 jobs
were being axed in the division and
its Kings Norton factory near Bir-
mingham was being shut.
But Melrose also said it was
investing £50m in other sites to
develop GKN’s ‘world-leading niche
technologies’ such as fuel tanks,
aircraft canopies and cabin win-
dows and ice-protection systems.
Chairman Justin Dowley said:
‘These results show the initial fruits
of the “improve” stage of Melrose’s
ownership of GKN and we are
excited about what is possible.’
Digital expert
leads bookie
WILLIAM Hill has appointed a dig-
ital expert as chief executive as it
moves away from the High Street
towards online betting.
The bookmaker’s chief digital
officer, Ulrik Bengtsson, will take
the reins at the end of the month.
William Hill has joined the race
with rivals such as GVC, which
owns Ladbrokes Coral, to expand
across the US.
A Supreme Court ruling last year
liberalising sports betting has
sparked a gold rush for bookmak-
ers hoping to capitalise.
William Hill confirmed yesterday
that previous boss Philip Bowcock
is a ‘good leaver’, and will receive
his notice pay and any bonus
schemes he is entitled to.
The six outstanding schemes
could hand him up to 1.5m shares,
worth £2.6m at today’s prices,
depending on the terms of his
contract. He is also likely to
receive his salary during his notice
period, adding around £600,000
to the ‘golden goodbye’.
Help to Buy lifts Redrow Ex-BT boss lands new job
ANOTHER major housebuilder has revealed
record annual profits off the back of the
Help to Buy scheme.
Redrow said profits jumped from £380m
to £406m in the year to June 30, after sales
rose from £1.9bn to £2.1bn.
It sold 6,443 homes over the period, up
from 5,718 the previous year.
Nearly one third of these were bought
by households using Help to Buy.
The taxpayer-funded scheme aims to
help families on to the housing ladder by
providing loans for up to 20pc of the value
of newly-built homes.
But it has faced persistent criticism that
it props up industry profits and is used by
those who do not need it. Redrow said
Help to Buy helped boost sales, along with
the ongoing shortage of new homes on
the market and fierce competition
between mortgage lenders.
But chief executive John Tutte rejected
criticism of Help to Buy and insisted it
would be ‘near impossible’ for some fami-
lies to buy a home without it.
‘Yes it has also benefited us, but to say
that our profits have grown entirely from
Help to Buy is far from the truth,’ he said.
Shares in Redrow rose by 3.5pc, or 20p,
yesterday to 586p. The firm will pay a divi-
dend of 60.5p for the full year, up from 28p
last year.
FORMeR BT boss Gavin Patterson has
landed a job at a £108bn American technol-
ogy group.
The 51-year-old (pictured), who left BT
at the end of January, will become chair-
man of Salesforce’s europe, Middle
east and Africa business.
His appointment comes after Cali-
fornia-based Salesforce vowed to put
£1.9bn into its uK business and build
a second big data centre there.
It has also hired Dame Jayne-Anne
Gadhia, former boss of Virgin
Money and chairman of the
London Stock exchange,
as the chief executive of
its uK and Ireland arm.
Salesforce was founded
by Silicon Valley entre-
preneur Marc Benioff, who has an estimated
fortune of £5.2bn. The firm sells call centre
software that lets businesses keep track of
customers and contact them.
Patterson’s role will be part time and
he will be tasked with forming rela-
tionships with big european firms
that could be potential customers.
The former chief executive
took the helm at BT in 2013 but
was sacked by chairman Jan du
Plessis after he lost the confidence
of top investors.
During his tenure he faced
criticism over customer serv-
ice and a lack of investment in
Britain’s broadband network,
while he piled billions into
television rights for football.
Banks see
total PPI
bill soar
to £53bn
Lloyds Barclays RBS HSBC CYBG
£20.1bn
£9.6bn
£6.2bn
£3.1bn
£4.4bn
SCANDAL TAKES TOLL ON BIG LENDERS
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