Scotland business

Clydesdale Bank faces extra £500m hit for mis-selling

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Media captionClydesdale Bank is putting aside up to £500m to compensate customers who were mis-sold financial products

Clydesdale Bank is to set aside as much as £500m in extra funding this year to compensate customers for mis-selling of financial products.

The sum is on top of more than £1.2bn set aside in previous years' provisions.

Parent company National Australian Bank (NAB) said between £350m and £500m more would be set aside this year, but added that the final cost remained uncertain.

The move was announced in its third quarter results on Monday.

Up until the end of March, NAB had set aside £806m to compensate customers for the mis-selling of payment protection insurance (PPI). A total of £325m has already been paid out.

NAB's cumulative provisions relating to interest rate hedging products amounted to £431m, about half of which has been paid out.

This year's extra funding will come from a £1.7bn mis-selling fund, which the bank is being required by UK regulators to make available after the Clydesdale is floated.

NAB is in the process of demerging and floating Glasgow-based Clydesdale, which includes the Yorkshire Bank.

It intends to complete the break-up by the end of this year.

In a statement, NAB said "substantial progress" had been made on the demerger and stock market sale. It will provide more detail with full-year results in late October.

The Australian banking group has been working hard to offload the Clydesdale, which amassed a large portfolio of bad property loans.

It has also been facing high costs of redress for mis-selling payment protection insurance and complex systems for business customers to protect against interest rate changes.

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