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DBRS: Additional PPI Provisions Significantly Weaken UK Banks’ 2019 Earnings Outlook

DBRS has published a commentary discussing the impact of the recent surge in PPI claims on the major UK banking groups.

Key Highlights include:
• Three of the large UK banks have announced substantial additional redress provisions, following a surge in the flow of PPI complaints in August before the deadline for claims.
• The announced charges are likely to have a significant impact on UK banks’ statutory earnings in 2019.
• However, based on the announced estimates, DBRS does not anticipate the additional PPI costs to have implications for the ratings.

“Using the banks’ underlying pre-tax profits in 2018 as a reference, the announced additional charges are equivalent to around a quarter of the latest full year profit for Barclays and up to one fifth for Lloyds and RBS.” said Tomasz Walkowicz, Vice President. However, taking into account the banks’ resilient capital positions, DBRS does not expect any rating implications.

DBRS notes that, in their announcements, the banks have stated that the estimated ranges were preliminary and unaudited therefore it cannot be excluded that the estimated additional PPI costs could be subject to further adjustments.

This commentary “Additional PPI Provisions Significantly Weaken UK Banks’ 2019 Earnings Outlook” is available at