The Bank of Queensland Ltd (ASX: BOQ) share price is in the red after the bank provided investors with a market update today.
The bank's shares are down 3.5% to $6.20 apiece at the time of writing after the company revealed, among other things, that it would reduce its workforce by up to 400 full-time employees (FTEs).
Let's explore what this means for the bank and its investors.
BOQ shares slide on market update, job cuts
'Strengthen, Simplify, Digitalise, and Optimise' are the four pillars BOQ has implemented as it seeks to improve profitability and grow the business.
In its interim results, the bank outlined the prospect of job cuts later in the year. The number was originally touted at 400. But, speculation mounted on Wednesday, with reports that up to 600 jobs might be on the cutting board.
Today's announcement confirmed that up to 400 FTE positions will be axed.
The Group has identified further opportunities to streamline its operating model as part of its ongoing transformation. Progress in delivering on simplification and digitisation strategic pillars will enable further productivity gains with the reduction of up to 400 FTE roles across the business.
The Group acknowledges these decisions impact on team members. BOQ is working closely with those affected, offering redundancies or redeployment opportunities. The Group expects to recognise a restructuring charge of $25m – $35m post tax, that will impact FY24 statutory net profit after tax.
Management expects the overall savings to be around $50 million per annum, alongside another $200 million in planned savings from other measures.
This isn't the first time BOQ has made such cuts. Earlier this year, the bank reduced its headcount by 250 positions. What long-term impact these moves might have on the BOQ share price remains to be seen.
Financial and market implications
The job cuts are expected to cost the company between $25 million and $35 million to initiate, and management notes that they will hit BOQ's net profit in 2024.
Bank of Queensland also provided an update on its "digital transformation" progress, noting that 25% of retail customers had migrated to its new digital platform.
It says the program remains on track, with the full restructuring completed sometime next year.
Following the restructuring, the bank rehashed its targets for FY26.
Since the 2022 strategy and financial targets were set, ongoing industry wide margin compression and elevated cost inflation have impacted returns. Given these material changes, BOQ has restated its previously disclosed FY26 targets to a Return on Equity of 8.0% and Cost to Income ratio of 56%.
It's a little too early for brokers to immediately react, but the opinion leading into this wasn't positive.
UBS, for instance, has a sell rating on BOQ shares, with a price target of $5.50. The broker is concerned about ongoing pressure on BOQ's net interest margin (NIM) and the potential for unforeseen cost increases.
Meanwhile, consensus rates the BOQ share price a sell as well, according to CommSec.
Foolish takeaway
The BOQ shares price are under pressure today as the bank confirms a number of job cuts in its most recent market update.
While the job cuts and other strategic changes may cause short-term disruption, they might be crucial for the bank's future. The BOQ share price is up 5.5% in the past 12 months.
