(Bloomberg) -- Royal Bank of Scotland Group (LON:RBS) Plc plans to set aside as much as 900 million pounds ($1.1 billion) more for the ongoing payment protection insurance scandal, taking the British lender’s bill to 6.2 billion pounds.
The volume of customer claims received during August was significantly higher than expected, with a further spike in the days leading up to a deadline of Aug. 29, according to a statement from the firm.
British lenders have spent the past eight years compensating customers who were mis-sold payment protection insurance they didn’t want or need. The policies, some of which dated back decades, were intended to cover missed debt repayments and were often sold using aggressive tactics. In the worst cases, banks misled customers by telling them that PPI was mandatory for loans.
RBS said the preliminary range for the latest provision is between 600 million pounds and 900 million pounds. “The processing of claims is ongoing and the ultimate provision recognized could be above or below this range,” the state-controlled lender said. The provision will be booked in the third quarter. RBS shares rose 1.2% in early trading Wednesday, broadly in line with other U.K. banks.
The news comes at a challenging time for RBS as it searches for a replacement for outgoing Chief Executive Officer Ross McEwan. The bank is also contending with the uncertainty of Brexit and blamed an “uncertain and competitive environment” last quarter for net interest income that missed analysts’ estimates.
In July Lloyds Banking Group Plc (LON:LLOY), the country’s biggest mortgage lender, took a similar charge as customers rushed to meet the deadline for claiming compensation. Banks paid 35.7 billion pounds to PPI customers between January 2011 and May this year, according to the Financial Conduct Authority.
(Updates with details throughout.)