Bendigo Bank saves $148m for COVID losses

Bendigo and Adelaide Bank has socked away an additional $148.3 million for COVID-19 credit losses for the financial year as it grapples with the fallout from the pandemic on its customers and the economy.

Bendigo said the provisions were made after the virus crisis forced the bank to significantly adjust its base case economic outlook to include lower GDP, higher unemployment and a fall in property prices.

"The bank has not assumed a sharp recovery in the adopted economic outlook, but rather a slower recovery with probabilities biased to the downside," the bank said in a statement published before the market opened.

The bank will take a $127.7 million hit to profits while increasing its general reserve for credit losses by $20.6 million, or a total of $148.3 million. Bendigo Bank shares rallied on the news in line with the rest of the sector, adding another 25¢ or 4 per cent to $6.54 in early trade.

Bendigo Bank managing director Marnie Baker said the bank had provided 20,411 retail and business customers with loans worth a collective $6.3 billion support since the virus crisis began.

“COVID-19 has demonstrated the flexibility of our organisation to adapt at scale in how we do business in line with our vision to be Australia’s bank of choice,” Ms Baker said.

Bendigo's portfolio of deferred loans is from the period in late March when the measures were announced until April 30. It includes 16,267 loans to consumers including mortgages and personal loans worth $4.6 billion and 4144 loans to commercial enterprises worth $1.7 billion.

The deferrals represent about 10 per cent of the dollar value of Bendigo's mortgage portfolio, 8 per cent of its personal loan portfolio and 11 per cent of its commercial lending portfolio.

The forecast hit to profits compares with $807 million from NAB, $1 billion from ANZ, $1.5 billion from CBA and $1.6 billion from Westpac. Insurer and regional lender Suncorp set aside just $133 million earlier this month.

The latest figures from the Australian Banking Association revealed that more than 705,000 loans had been frozen at the request of customers worth more than $200 billion.

Last month, Bendigo withdrew its guidance for bad and doubtful debts for the second half which it told the market would be within long-term averages.

The bank said "given the level of uncertainty created by the COVID-19 pandemic" it was no longer able to "make a reasonable assessment" of the "impact on our credit provisions" in the second half.