Bank of Queensland (ASX:BOQ) share price on watch after COVID and employee underpayment update

The Bank of Queensland Limited (ASX:BOQ) share price will be on watch today after a COVID-19 and employee underpayment update…

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The Bank of Queensland Limited (ASX: BOQ) share price will be on watch this morning following the release of an update.

What did Bank of Queensland announce?

This morning the regional bank announced that it has completed its FY 2020 collective provision modelling.

According to the release, Bank of Queensland now expects its FY 2020 loan impairment expense to be $175 million (pre‐tax). This equates to approximately 37 basis points of gross loans.

Management advised that this includes a COVID‐19 related collective provision expense of $133 million (pre‐tax), up from $71 million previously. This is based on updated RBA economic data, analysis of customers on the banking relief package and their likelihood of recovery, and a significant exposure review.

Bank of Queensland’s CEO, George Frazis, commented: ‘The revised provision reflects the anticipated lifetime losses on the current portfolio relating to the impacts of COVID‐19 in line with AASB 9 Financial Instruments.”

“As we all know, this has been an unprecedented year and BOQ is committed to supporting our customers throughout this period. We are very pleased to see many of our customers returning to work and re‐opening their businesses and will continue to work closely with those that require further assistance,” Mr Frazis said.

As at 31 August 2020, the bank had 12% of housing customers on the banking relief package and 16% of SME customers. Of those customers, 25% are continuing to make full or partial repayments.

Employee underpayment.

In addition to this, the company revealed a further $11 million (pre‐tax) expense. This follows a pro‐active review of historical employee pay and entitlements that was undertaken after the company witnessed remuneration and superannuation issues elsewhere.

Commenting on the review, the company advised: “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.”

The bank intends to ensure that those impacted are remediated fully as a matter of priority. It will also undertake a broader external wage analysis and review for EA employees.

Mr Frazis commented: “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.”

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