The Terminator's Ad Campaign Is Hammering U.K. Lender CYBG

(Bloomberg) -- The return of an advertising campaign starring an animatronic head of Arnold Schwarzenegger has caused complaints about mis-sold payment protection insurance to surge for one U.K. bank, sending its stock into the red.

CYBG Plc shares fell as much as 7 percent on Wednesday after the company said it will increase provisions to cover PPI compensation by 350 million pounds ($498 million), resulting in a pretax charge of 202 million pounds in interim results. The lender said it has seen an “elevated level of complaints” in the six months to the end of March and anticipates this will remain the case for a period of time, in part due to the campaign starring Schwarzenegger.

The U.K.’s Financial Conduct Authority re-launched an informational advertising campaign earlier this month, in which a disembodied model of the “Terminator” star’s head urges people to ensure they file a claim for mis-sold PPI before the August 2019 deadline. Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc are among other U.K. lenders that have set aside money for the claims.

“Without doubt, this is a bit of a disaster for CYBG,” Shore Capital Ltd. analyst Gary Greenwood wrote in a note. In the past, the bank had been largely protected from PPI claims by the indemnity provided by National Australia Bank Ltd., from which CYBG was spun out in March 2016. But the new provision means CYBG will have run through the undrawn indemnity remaining and will take the hit on its own bottom line.

The extra provisions made by CYBG, which owns the Clydesdale and Yorkshire bank brands, raises questions about implications for other banks, particularly for Lloyds, according to Greenwood. Still, CYBG could just be “a little behind the curve” given that Lloyds only recently updated its PPI assumptions, the analyst said.

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