Motley Fool Australia

Bank of Queensland share price drops on COVID-19 provisions increase

Image source: Getty Images

The Bank of Queensland Limited (ASX: BOQ) share price has come under pressure on Friday morning and is dropping lower.

At the time of writing the regional bank’s shares are down by just over 2% to $6.29.

This latest decline means the Bank of Queensland share price is now down a disappointing 37% from its 52-week high of $9.98.

Why is the Bank of Queensland share price dropping lower?

This morning Bank of Queensland released a very revealing quarterly APRA Basel III Pillar 3 report for the period ending 31 May 2020.

This update shows that the bank has experienced a sharp increase in bad and doubtful debts because of the pandemic.

According to the release, Bank of Queensland’s +90 days past due loans has increased by $112 million during the quarter.

This $112 million includes $58 million of customer loans where banking relief package applications have been processed subsequent to 31 May 2020.

Management advised that the balance of the increase relates to customers who have not elected to enter into a relief package or who were ineligible.

Increased provisions.

In light of the above, Bank of Queensland has decided to increase its COVID-19 provisions.

It has taken a further collective provision of $61 million during the third quarter, bringing the total COVID‐19 related collective provision to $71 million.

This provision is at the top end of the range of $49 million to $71 million which was detailed in the half year results.

But whether it stops there, only time will tell. Management warned that there remains considerable economic uncertainty and it will continue to monitor the impacts of COVID‐19 on its portfolio and the collective provision prior to finalising its year end position.

No comments were made in respect to its dividend plans. A further update will be provided with its full year results later this year.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Related Articles…