Bank of Queensland has revealed it will take loan impairment losses of $175 million before tax in its 2029-20 annual results due to be released on October 14.
The news jolted investors who sold off the shares which ended the session down 6.7% at $5.92.
This is more than six times the figure tipped back in April and raises doubts about whether the Brisbane-based regional bank will be able to pay a final dividend after it deferred it’s interim earlier in the year.
CEO George Frazis though was equivocal on the issue, neither ruling out a final or confirming one would be paid.
All he would say in yesterday’s update was that he knew dividends were important for retail investors (Gee, no!).
“We have completed our scenario analysis in relation to dividends and have consulted with APRA in line with the guidance issued on 29 July 2020. The board will make a determination on dividends in relation to FY20 at our full-year results,” Mr. Frazis said.
On the face of it, the bank is heading for a statutory loss after reporting a 40% fall in interim statutory profit of $93 million and cash earnings of $151 million, down 10%.
The second half results have clearly been hit by the impact of COVID-19 and the lockdowns, although the bank did not talk about its trading experience in the year to August 31.
Bank of Queensland revealed a COVID‐19 related collective provision expense of $133 million based on updated RBA economic data, analysis of customers on the banking relief package and the likelihood of recovery, and a significant exposure review. It had previously forecast a $10 million COVID hit.
The sharp rise in the COVID-19 provisioning was the biggest part of the six-fold rise in total loan impairments from $28 million to $175 million.
The bank said the pandemic had resulted in 12% of homeowners and 16% of small business customers applying for loan relief.
In Tuesday’s statement, Mr. Frazis said he was pleased that a quarter of BOQ customers who applied for loan relief had started making full or partial repayments.
But there was also an added problem in the statement – underpayment of staff wages.
BOQ said it had conducted an audit of employee remuneration after underpayments had been reported in the industry and found $2.4 million in superannuation had not been paid properly. The bank has set aside $11 million for further wage problems, as the investigation remains ongoing. The $11 million, includes the $2.4 million already paid and a provision of $8.6 million which “will be taken in the FY20 financial statements.”
Mr. Frazis apologised for the errors and committed to contacting all impacted employees in the coming months. “We will get this right and we will make sure our people, past and present receive every cent they are owed. This is an absolute priority,” he said.
