Bank of Queensland will take control of owner-manager branches and turn them into corporate branches. And then close many of them.
The bank yesterday then announced an even bigger shift in strategy, in effect converting itself into a business bank.
BOQ explained its new strategy as: “to broaden the revenue mix towards specialist, high-value market segments.
“This strategy will focus on targeted growth corridors across the country with an increased emphasis and investment on leveraging BOQ’s competitive advantage in supporting Queensland businesses.”
The conversion of 114 franchised branches (which are spared across the country) into corporate branches is the bigger surprise, and will add $115 million a year to operating costs on the basis of the current branch footprint.
“BOQ is committed to maintaining an appropriate physical presence in key markets, recognising that branches remain an important part of the banking experience for some customers” the bank said, though this little more than code for a program of branch closures.
The bank also said there will be a “reduction” of up to 400 FTE roles across the business. On Wednesday The Australian reported this affects 600 staff. The job cuts come from IT, operations & retail banking.
The job cuts will deliver an annualised saving of around $50 million, in addition to BOQ’s previously stated target of $200 million cost savings by FY2026.
Patrick Allaway, the bank’s CEO, said that the bank’s “heritage retail banking operating model that has served us well in the past is no longer sustainable in its current state in a lower returning environment.
“Ongoing industry wide margin compression and elevated cost inflation have impacted returns.”
Given these changes, BOQ has restated its previously disclosed F20Y26 targets to a return on equity of 8.0 per cent and a cost to income ratio of 56 per cent.
Finally the bank disclosed the migration of ME customers is taking an inordinate amount of time.
‘The full ME migration for deposit only customers is expected to be finalised through FY2025” - or in other words, three and a half years after taking control of ME.