Are Bank of Queensland shares a buy following the CEO’s shock ousting?

The Bank of Queensland Ltd (ASX: BOQ) share price suffered yesterday when it was announced that the CEO George Frazis had left the bank.

Frazis, who had been in charge of the bank for a few years, left on the day of the announcement. He’ll still get his entitlements in accordance with the terms of his contract of employment.

But, it’s now the BOQ chair Patrick Allaway who is in charge after becoming the executive chair while the company looks for a new CEO.

The choice of Allaway as the leader is “designed to retain stability and will ensure that the executive leadership team can stay focused on their current roles and responsibilities”.

It was decided by the bank’s board that different leadership was required to ensure that BOQ can “continue to build a stronger and more resilient bank through future cycles”.

Growth is still seen as important, but it wants to focus on strengthening its financial and operational resilience, invest in building a cloud-based digital and data-led scalable bank, and optimise performance through simplification and productivity.

Is this an opportunity with the BOQ share price?

It’s an interesting question. How much value does a CEO add to a business?

Arguably, not that much. In times of worsening economic times, a bank would supposedly want its loan book to perform as well as it can. There’s not much point achieving growth with a 2% lending margin, or 2% net interest margin (NIM), if that loan goes bad.

It may be worthwhile to be prudent during difficult times.

The CEO is gone, but the BOQ share price is down more than 5% since the announcement.

The broker UBS didn’t change its price target on BOQ after this news. A price target is where the broker thinks the valuation will be in 12 months. UBS’ price target on BOQ is $8, implying a possible rise of 12%.

Credit Suisse is also neutral on the banking business, with a price target of $7.50. That implies a possible rise of around 5%. The broker’s price target was a sizeable cut from before.

Morgan Stanley, another broker, is equal-weight on the BOQ share price. But, the price target is $8.30 – that suggests a mid-teen rise for the business. The broker noted that this could lead to investor uncertainty about the bank’s long-term strategy.

Using Morgan Stanley’s numbers, the BOQ share price is valued at 8x FY23’s estimated earnings with a possible grossed-up dividend yield of 10.4%.

The post Are Bank of Queensland shares a buy following the CEO’s shock ousting? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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