New ANZ Group Holdings Ltd (ASX: ANZ) chief executive Nuno Matos has wasted no time swinging the axe, announcing that 3500 employees at the bank and another 1000 consultants will leave the business this month.
The announcement was titled "Changes to better focus on priorities", but what it means for the bottom line is large cost savings and an expected $560 million pre-tax restructuring charge. The full realised restructuring amount will be updated and released at the company's full-year results release on November 10.
Macquarie analysts, in a cheekily-titled research report headed, "The Costfather", say the announcement is neutral for the stock, but raise the question, "Is this just the beginning?".
We think this is likely the beginning of a series of changes at ANZ as the new CEO seeks to reshape the business and significantly reduce costs. That said, we note that as part of the acquisition of Suncorp Bank, ANZ has committed to 'No net job losses across Australia in Suncorp Bank and ANZ, as a result of the transaction, for three years'. This is likely to limit the potential for further restructuring within the retail bank until Sep-27.
Macquarie's analysts noted that a cost-saving figure to flow from the job cuts was not disclosed but based on the average cost-per-employee, "the headcount reduction could reduce costs by about $600 million-$700 million''.
"However we anticipate that management will reinvest some of the savings into increased investment, and we forecast a circa-$460 million reduction in FY27 costs,'' Macquarie analysts said.
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Payouts to be cut too?
Worryingly for investors, Macquarie is also forecasting a final dividend cut, from 83 cents per share to 73 cents per share, with further cost-cutting measures possibly leading to an additional strain on capital.
As a result, we continue to see a risk of a dividend rebasing to a more sustainable payout ratio, although increased franking capacity provides some offset for domestic investors.
Macquarie increased its price target for ANZ shares from $30 to $31, while the stock was changing hands for $33.36 on Wednesday.
