MyState Ltd has increased its provisions to take account of COVID-19 impacts and has flagged a capital raising.

MyState announced yesterday that it expects to increase its collective provision and general reserve for credit losses by A$3 million to $4 million.

At the half year, the group’s collective provision for impairment was $2.7 million – up from $2.1 million at June 30 last year.

MyState chief executive Melos Sulicich said in a statement: “Most of the increase in the collective provision is based on our view on the impacts of COVID-19 and does not reflect any significant deterioration in our underlying credit quality.

“We are assuming a slow economic recovery and the increased provision reflects significant changes to the economic outlook impact growth in the economy.”

Sulicich said the group would conduct a debt investor call in preparation for a possible Tier 2 subordinated note issue, to be launched subject to market conditions.

At the end of May, MyState’s common equity tier 1 capital ratio was 10.93 per cent and its total capital ratio was 12.87 per cent.

Moody’s has assigned a long-term issuer credit rating of Baa2 to MyState.