However, industry sources say that even taking into account the billions they will have paid out in redress, the insurance was so “insanely profitable” that the banks will still come out ahead by the time next year’s August 29 deadline for filing compensation claims comes round.

According to data from the Financial Conduct Authority, so far £31.5billion has been repaid to the customers of banks, credit card companies, building societies and other firms that sold PPI. A source said firms are bracing themselves for a surge in claims before the deadline, which could see them paying compensation worth about 60 per cent of what they made on selling the policies.

On that basis, “PPI will still…