UK bank stocks dipped in early trading today, after the City watchdog announced that it was pushing back its deadline for payment protection insurance (PPI) complaints.
The Financial Conduct Authority (FCA) said it plans to set a cut-off point for PPI claims that will fall by the end of June 2019 at the latest. Previously, banks had been looking at a 2018 deadline, but the watchdog wants to run a public awareness campaign before bringing PPI claims to an end.
Barclays shares were down 2.5 per cent, while HSBC Holdings was down 0.8 per cent and Standard Chartered was down 1.6 per cent. Meanwhile, Lloyds Banking Group was down 1.9 per cent and Royal Bank of Scotland was down 2.6 per cent.
"The introduction of a deadline, combined with a public awareness campaign, is likely to lead to a spike in claims in the short term," warned Laith Khalaf, senior analyst at Hargreaves Lansdown. "Banks have already raised their PPI provisions in anticipation of the remaining wave of claims, though they may have to make adjustments if these prove to be insufficient."
Meanwhile, analysts from Shore Capital wrote in a note: "Whether additional provisions are required and how material these may be is uncertain at this stage and we await further comment from the companies in this respect. However, we would not be surprised to see top-ups of a few hundred million pounds (and perhaps as high as £1bn) for each of the large UK banks, with Lloyds being the worst affected."
Lloyds was forced to cut bonuses earlier this year, after PPI payouts ate into profits yet again.
And RBS announced in January that it was setting aside £500m for PPI claims and payments - bringing its total PPI-related bill up to that point to £4.3bn.