The struggling Brisbane-based regional bank on Thursday unveiled a wholesale revamp of its business structure and operating systems in what appears to be a final gamble for the company. If this revamp fails, Bank of Queensland may be swallowed by a larger rival for prudential reasons (a bailout).
The savings from the restructuring won't start to flow until next year and into 2026 as the bank abandons its franchise model in favour of wholly owned operations. The bottom line is that the bank aims to shift its focus from consumer customers to business banking.
As part of the restructuring plan, the bank will cut 400 jobs to streamline distribution and focus on growth through its business banking operations. This is in addition to the 250 job cuts announced earlier. The cuts are expected to save around $50 million per year, and the bank will recognise a restructuring charge of $25 million to $35 million in its full-year accounts.
Given that cash earnings were down 33% at $172 million in the February half-year, the latest costs indicate a very weak result. The lender will also convert all 114 of its owner-managed branches into corporate branches by next March, at a cost of $115 million to $125 million to be amortised over four years. This is expected to result in an annual cash profit benefit of $20 million starting in the 2026 financial year.
Bank of Queensland claims it has been considering ways to reduce complexity across its business and transition to digital banking as part of a restructuring plan and focus on business banking amid heightened competition in both lending and deposits. However, the bank has already wasted $1.325 billion on the takeover of Members Equity Bank (it wrote off $200 million in goodwill in February 2023). The integration has failed, leading to significant management and board turnover.
At the same time, the bank botched its supervision of money laundering and anti-terrorism regulations, resulting in a $50 million capital overlay imposed by APRA and tens of millions of dollars spent on remediation and increased regulatory oversight.
After searching for a new CEO last year, the chair, Patrick Allaway, and the board decided that he was the best person for the role. Now, this new approach to the bank's future is his. In Thursday's release, he stated, "We have long recognised the need to address legacy complexity and structural challenges to change the way we do business."
However, the Finance Sector Union has a different perspective, saying that the job losses will inevitably impact customers and the service they receive from the bank. "As part of a pledge to the market to deliver $200 million in productivity by 2026, BOQ has already axed 250 jobs. Confirmation of a further 400 jobs cut is a devastating blow to workers at BOQ," FSU National Secretary Julia Angrisano said.
Investors were initially sceptical, pushing the shares down 4% by mid-afternoon on Thursday. Before the announcement, they had risen towards year-highs. Now?
