ROYAL Bank of Scotland (RBS) has warned of a hit of up to £900 million for payment protection insurance after a last-minute surge in claims ahead of the August deadline.

The part-nationalised bank said the number of claims last month was “significantly higher than expected”, with a spike in the final days before the August 29 deadline.

It said it now expects to take charge of between £600m and £900m for payment protection insurance (PPI) in its third-quarter results.

This comes on top of the £5.3 billion in provisions already set aside by the bank.

Separately yesterday, Virgin Money owner Clydesdale and Yorkshire bank group (CYBG) warned over an expected “material” cost hit from the recent PPI claims frenzy.

The CYBG, which bought Virgin Money last October, said it saw “unprecedented” levels of information requests and a jump in PPI complaints last month and in the final days before the claims cut-off.

It said it would take “several months” to calculate the financial impact, but is working on an initial cost estimate, which is expected to be material.

The industry has seen a rush in PPI mis-selling claims this year before the deadline, with a pick up in the final few months and a flurry in the final days.

Santander was forced to extend its deadline for claims to be submitted after complaints its website was not working, which it said was due to high numbers of customers contacting it about PPI.

RBS’s PPI charge looks set to dent its third-quarter figures after a robust first half for the lender, which saw it deliver a £1.7bn special dividend payout for shareholders, offering a surprise windfall for the taxpayer.

An estimated 64 million PPI policies were sold in the UK – many in the 1990s and early 2000s. PPI was routinely added to products such as store cards, credit cards or mortgages.

It was intended to protect people if they could not keep up with their payments, due to illness or unemployment, for example.

But it was widely mis-sold, with customers pressured into it, while many did not know they had it or found it was unsuitable for them.