Bendigo and Adelaide Bank has outlined a provision of $148.3 million for the potential impact of the COVID-19 pandemic on its customers.
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 credit expense of $127.7 million in its full-year accounts and an increase in the general reserve for credit losses by $20.6 million.
Managing director Marnie Baker said the lender has provided support to 20,144 personal and business accounts worth $6.3 billion totally to weather the COVID-19 impacts.
Investors shrugged off the news on Thursday, with Bendigo and Adelaide Bank shares rising 7.15 per cent to $6.74 by 1110 AEST, in line with a broader rally among banking stocks as the economy reopens.
The lender 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 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.
“We are very well placed, driven by our longstanding and prudent risk appetite settings, increased credit provisioning and a strong balance sheet and capital base, above APRA’s unquestionably strong benchmark target for standardised banks, and further bolstered by our recent capital raise,” Ms Baker said in a statement.
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 COVID provision means Bendigo and Adelaide Bank joins larger rivals in a hit from the coronavirus related impact on the Australian economy.
Earlier this month, NAB outlined an $807 million hit and ANZ about $1 billion, while CBA and Westpac said they had set aside $1.5 billion and $1.6 billion respectively.