Guidance to IMB shareholders on capital management requirements and COVID-19 and broader economic impacts

The conditions arising from the COVID-19 pandemic have been challenging for many members, businesses and the wider community, and IMB Bank is endeavouring to support all stakeholders wherever possible. Key economic indicators such as unemployment, property prices and growth have declined, and regulators are providing ongoing guidance to industry to ensure the financial system remains financially and operationally resilient. 

Like all ADIs, IMB Bank’s financial performance for 2019-2020 will reflect the impacts of COVID-19 and the broader economic environment. The uncertain economic context makes it more difficult for IMB Bank to provide clear guidance about the likely impacts to its performance, and there are a range of accounting and financial matters that continue to be worked through.

IMB Bank acknowledges communications from APRA to all Authorised Deposit-taking Institutions (ADIs) setting out its views relating to capital management in the current environment. APRA’s expectations are that discretionary capital distributions (such as dividends) are to be limited. The Board is keeping this regulatory guidance under consideration as IMB Bank closes out the financial year.

Over recent months, IMB Bank has provided various forms of financial relief to its members, such as loan hardship assistance, primarily by way of repayment moratoriums for affected borrowers. The quantification of IMB Bank’s loan provisions for the 2019-2020 year in accordance with accounting standards and regulatory requirements is occurring and further detail will be provided when IMB releases its full year results. While it is expected that many borrowers will be in a position to return to normal loan repayments after their moratorium period comes to an end, the impairment charge is likely to include a more significant collective provision than in previous years. Changes to provisioning levels will primarily relate to the impacts of COVID-19 and not to any significant deterioration in IMB Bank’s underlying credit quality.

While no decision has been made as to the amount or the timing for declaring any final dividend for 2019-2020, in light of the economic and regulatory conditions, it can be reasonably expected that there will be a reduction in the level of future dividends, with the potential that any dividends paid may fall outside of the range of 65%-80% of shareholders’ interest in contributed funding.  As always, the Board will ensure the interests of all stakeholders and all applicable regulatory requirements are considered when determining the level and appropriate time at which to declare any final dividend.

Further, given APRA’s expectations relating to capital conservation, it is not envisaged that an off-market share buyback will occur in the 2020-2021 financial year.

IMB Bank continues to comfortably meet key regulatory capital and liquidity ratios, and is a resilient organisation, now in its 140th year of operation. The Board is acutely aware of the negative impacts experienced by IMB’s members and the broader community as a result of the COVID-19 pandemic and remains focused on supporting all members throughout this unique period. 

1 July 2020