Bank of Queensland Ltd (ASX: BOQ) shares have drifted higher in the past month, up 2%.
The bank is making headlines today with a bold move to cut up to 600 jobs. Whilst the update isn't price sensitive at all, it does form part of the bank's strategy to reduce operating costs.
Bank of Queensland shares are currently fetching $6.36 apiece, up less than 1% on the day.
Let's dive in.
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Job cuts: What's the story for Bank of Queensland shares?
BOQ has reportedly started talks with employees about several upcoming job cuts announced during its interim results in April.
The job reductions are part of the bank's plan to slash costs and are said to span several areas, including marketing, human resources, and retail banking, according to The Australian.
However, if implemented in full, the number could be as high as 600, bringing the bank's total headcount to around 5,500.
We understand there will be an impact on some of our people from changes we make to our structure and are committed to supporting those affected, including exploring opportunities for redeployment into new roles.
BOQ will remain focused on executing our transformation strategy as we continue to build a simpler, specialist bank.
Whether this will have a long-term impact on Bank of Queensland shares remains to be seen. But this isn't the first time BOQ has taken such steps. Nearly a year ago, the bank reduced its workforce by 250 jobs.
It isn't the first time we've been informed about these job cuts either. They were outlined in the bank's interim FY24 results, after a soft set of numbers.
In H1 FY24, BOQ reported a 33% drop in cash earnings to $172 million and a 3 basis point decline in its net interest margin (NIM) to 1.55%.
What's the reaction?
The Finance Sector Union has reportedly stepped up and voiced its concerns about the potential fallout from the decision.
According to separate reporting from The Australian, the Union said, "BOQ have already axed 250 jobs". It stated:
Speculation that a further 600 jobs cut would be a devastating blow to workers at BOQ … Make no mistake, when BOQ says simplification, it means job cuts.
Workers are today paying the price for management poor risk governance practice. BOQ need to come clean on their plans. Workers have been asking for greater transparency.
Brokers mixed on Bank of Queensland shares
Analysts have mixed views on BOQ's prospects. UBS, for example, has issued a sell rating on Bank of Queensland shares, with a price target of $5.50. This suggests a potential downside of over 13% from current levels.
UBS is particularly worried about ongoing pressure on BOQ's NIM and the risk of unforeseen cost increases.
Yet, the broker does see a silver lining. It forecasts a rebound in BOQ's net profit, expecting growth of 8.8% in FY25 and 14.4% in FY26.
On the flip side, BOQ's dividend yield is hard to overlook. At its current share price, BOQ offers a trailing dividend yield of about 6%, which rises to 8.5% with franking credits.
Foolish takeaway
Bank of Queensland is making decisive moves to streamline its operations and stay competitive. The job cuts and strategic changes may bring short-term pain, but they are essential steps in BOQ's journey toward long-term success.
Time will tell if this decision has any impact on the stock price. Bank of Queensland shares are up 8% in the past 12 months.
