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The Bank of Queensland Ltd (ASX: BOQ) has faced a challenging year, marked by a nearly 20% decline in its share price. Despite a 6% increase in the past month, the recently released FY23 results did not offer many positive indicators for the financial institution. Cash earnings per share recorded a 10% decline to 68.4 cents, while the statutory net profit after tax plummeted by 70% to $124 million.
Additionally, the annual dividend per share saw a decrease of 11%, falling to 41 cents. For investors seeking a comprehensive view of the financial sector, it would be prudent to consider monitoring other ASX financial stocks alongside assessing the performance of Bank of Queensland.
Factors contributing to this performance include a 2 basis points drop in the net interest margin (NIM) to 1.69%, housing loan contraction of 1%, and a $58 million increase in loan impairment expenses to $71 million.
The question arises: Can the Bank of Queensland share price reach $6 by Christmas?
While the timeframe of one month seems short-term for such predictions, returning to $6 wouldn't be considered unreasonable. At the beginning of the year, BOQ's share price was above $7.
Projections on Commsec estimate an EPS of 47.8 cents, placing the current BOQ share price at 11.5 times FY24's estimated earnings. If it were to reach $6, the P/E ratio would be 12.5 times FY24's estimated earnings. While a P/E ratio over 12 times might be reasonable for a growing company, the projection for FY25 suggests a potential decrease in earnings, which could impact investors' valuation.
The current sentiment among analysts appears negative, with seven sell ratings, two holds, and only one buy rating. This suggests a consensus that the BOQ share price may face downward pressure.
Looking beyond the short term, UBS acknowledges the bank's cost reduction and digital transformation plans, including a workforce reduction of around 400 employees by FY26. However, the bank's heavy reliance on external factors, increasing technology costs, and potential challenges in delivering digital transformation and cost reduction plans lead UBS to rate BOQ as a sell. The broker is cautious about possible remediation costs and considers the normalization of the credit cycle.
In conclusion, while a short-term rebound to $6 might not be implausible, the bank's long-term outlook is clouded with uncertainties and challenges, making it crucial for investors to carefully assess the risks and align their expectations with the prevailing market conditions
