Bendigo and Adelaide Bank has outlined a provision of $148.3 million for potential future impacts on account of the COVID-19 pandemic.
The regional bank says the extra charge to its accounts is based on a significant change to the economic outlook including lower GDP, higher unemployment and a reduction in residential and commercial property prices.
It does not expect any sharp recovery in the economic outlook but says this will take time “with probabilities biased to the downside”.
The additional provision comprises of an increase of FY20 credit expense of $127.7 million and the general reserve for credit losses of $20.6 million.
Bendigo and Adelaide Bank in February slashed its interim dividend as rising costs weighed heavily on its first-half result and raised $300 million through a share placement to strengthen its buffer above APRA’s “unquestionably strong” capital ratio.
The bank on Thursday said the new COVID provision would decrease the group’s Common Equity Tier 1 (CET1) capital ratio by 40 basis points but at 9.30 per cent as at March 31, this would still be above APRA’s unquestionably strong benchmark target for standardised banks.
The lender said its April data showed improved arrears in the mortgage portfolio and stable arrears in the other consumer portfolios.
There has been a slight increase in arrears for the business and agribusiness portfolios with business impaired loans decreasing during the period.
The lender has provided support for more than 20,000 personal and business accounts to weather the COVID-19 impacts, managing director Marnie Baker said in a statement.