BOQ’s COVID provisions hit $135m

After completing its provisions modelling for the 2020 financial year (FY20), the Bank of Queensland Ltd (BOQ) has revealed that its loan impairment expense will total $175 million (pre‐tax), including a COVID‐19-related collective provision expense of $133 million.

According to the bank, the provisions are based on updated economic data, analysis of customers on loan relief package and their likelihood of recovery, and a “significant exposure review”.

An additional expense of $11 million has also been realised, resulting from a proactive review of historical employee pay and entitlements.

BOQ revealed that the FY20 impairment expense of $175 million equates to approximately 37 bps of gross loans.

The provisions are expected to reduce BOQ’s CET1 ratio by 39 bps, with CET1 ending the FY20 above the target range of 9‐9.5 per cent due to “strong 2H20 organic capital generation”, which BOQ claimed “broadly offsets this reduction”.

“The revised provision reflects the anticipated lifetime losses on the current portfolio relating to the impacts of COVID‐19 in line with AASB 9 Financial Instruments,” BOQ’s managing director and CEO George Frazis said.

Mr Frazis said BOQ remains committed to supporting customers during the crisis by “ensuring a flow of new credit into the economy to help small and medium businesses get back on their feet”.

The CEO added that BOQ continues to see reductions in customers accessing financial assistance through the banking relief package.

As at 31 August 2020, approximately 12 per cent of BOQ’s housing customers and 16 per cent of SME customers were reported to be on relief packages.

Of those customers accessing the relief packages, 25 per cent have continued to make full or partial repayments.

“As we all know, this has been an unprecedented year, and BOQ is committed to supporting our customers throughout this period,” Mr Frazis added.

“We are very pleased to see many of our customers returning to work and reopening their businesses and will continue to work closely with those that require further assistance.”

[Related: BOQ director to step down]