Barclays Sees $2 Billion in Insurance Costs, Threatening Buyback

(Bloomberg) -- Barclays Plc is putting aside an estimated 1.6 billion pounds ($2 billion) more after a rush in last-minute payment protection insurance claims, threatening the lender’s promise to return more money to shareholders.

The bank said a “significantly higher volume of PPI-related claims” ahead of the Aug. 29 regulatory deadline led to the provision of between 1.2 billion pounds and 1.6 billion pounds. The lender is due to take the charge in the third quarter, according to a statement after the London market closed Monday. It’s the second British bank to take such a charge today after Lloyds Banking Group Plc earmarked as much as 1.8 billion pounds.

The fresh provision by the London-based lender takes the total bill for its part in the U.K.’s most expensive financial scandal to 11.2 billion pounds, the second highest of any lender, but still only about half of the cost to Lloyds.

A rush of claims ahead of the deadline has already led CYBG Plc and Royal Bank of Scotland Group Plc to add to their costs for PPI mis-selling. The total cost of these provisions to the British banking industry now stands at 53.3 billion pounds.

Analysts at Citigroup Inc. said last week that they expected Barclays to raise its PPI provision by as much as 1.8 billion pounds, which they said would leave the dividend intact but “all but remove the possibility of supplementing this with ordinary share buybacks.”

Barclays vowed in February to deliver more buybacks and dividends on the strength of its trading unit. The bank did not mention this plan in Monday’s statement.

To contact the reporter on this story: Harry Wilson in London at hwilson57@bloomberg.net

To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Marion Dakers, Keith Campbell

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