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BoQ pulls back $75m from rainy-day fund as outlook improves

Business

Bank of Queensland is likely to reduce regulatory provisioning by about $75 million on the basis of an improved economic outlook.

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The bank, which is in the middle of a takeover of ME Bank, said its quarterly reporting to APRA for the period ending May 31 was expected to include a decrease in provisioning of $75 million.

“The lower collective provision is due primarily to the improved economic outlook, with a further reduction from improvements in data quality relating to collateral,” the bank said.

“BOQ continues to monitor the ongoing economic impacts resulting from COVID-19 and to assess the collective provision accordingly. ”

In September, the bank made a provision of $175 million because of the increased probability of “downside and severe case scenarios”.

At the time there was an expectation of increased unemployment and falling house prices as well as a long-running economic downturn.

In contrast, group managing director George Frazis said Australia was now experiencing strengthening business and consumer confidence which was driving the economic recovery.

This was supported by strong housing growth, lower unemployment rates and increased business investment, Frazis said.

The BOQ decision came as the Commonwealth Bank said home buying, education and health and fitness spending intentions rose in May, reflecting a growing confidence and optimism.

“Together with a strong labour market and positive wealth effects from rising dwelling prices, we expect consumer spending to support Australia’s economic growth in 2021,” the bank said.

 

“The reduction in the collective provision during the quarter reflects this improvement in the current economic environment,” he said.

“We continue to prudently manage our provisions to ensure we are well covered for any potential lifetime losses arising from COVID-19.”

 

 

 

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