Bank of Queensland (ASX: BOQ) may be seeing positive signs like a reduction in customers seeking pandemic-related relief packages, but updated economic forecasts have led the group to announce a $175 million loan impairment expense for FY20.
The Brisbane-based bank will also book a $11 million expense relating to an employee pay review.
BOQ has drawn upon RBA data as well as industry and sector impact assumptions to conclude there will be higher unemployment than its expectations in first half reporting, as well as downgraded property prices and a longer duration of the economic downturn.
The company has also increased the probability weightings to the downside and severe case scenarios from those in its previous modelling.
"The revised provision reflects the anticipated lifetime losses on the current portfolio relating to the impacts of COVID19 in line with AASB 9 Financial Instruments," says managing director and chief executive officer George Frazis.
The group reports 12 per cent of its housing customers are now on the banking relief package along with 16 per cent of SME customers. Of those who are on these packages, a quarter of them are continuing 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," says Frazis.
"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."
Payment and entitlement review
After witnessing remuneration and superannuation issues elsewhere, BOQ made the call to start its own review of employees' pay and entitlements.
That initial internal review identified some irregularities in superannuation payments and then subsequently identified potential issues relating to people employed under an Enterprise Agreement (EA) and specific requirements under the 2010, 2014 and 2018 EAs.
BOQ has made a full and unreserved apology to people affected by these issues and will ensure people are remediated fully as a matter of priority as it completes a broader external wage analysis and review for EA employees.
The Fair Work Ombudsman and the Financial Services Union (FSU) have also been notified, with third parties appointed to assist with the analysis and remediation process.
Out of the expected $11 million expense, the bank has already made superannuation payments of $2.4 million to the Australian Taxation Office (ATO) as part of the Superannuation Guarantee Amnesty, with the remaining provision of $8.6 million set aside.
"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," says Frazis.
Updated at 11:08am AEST on 29 September 2020.