BOQ extends gains after FY result, analyst upgrades
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The news: Bank of Queensland shares extended gains on the ASX after the market responded positively to the lender's full-year result on Wednesday.
The numbers: BOQ shares were up 4.6% to $6.99 by 1:50pm AEDT, after closing 6.5% higher on Wednesday.
Analysts made the following changes to their ratings on BOQ following the result:
- Jarden retained its 'neutral' rating and lifted its target price from $6 to $6.20;
- Morgan Stanley kept its 'underweight' rating and price target of $5.70;
- Morningstar left its fair value estimate of $7.50 unchanged; and
- Macquarie maintained its 'underperform' rating and raised its target price from $5 to $5.50.
The context: Jarden analysts said BOQ's result was better than expected, due mainly to lower bad debts and a resilient net interest margin (NIM). They also noted that BOQ's FY25 earnings outlook was tracking better-than-expected, given a ramp-up in cost-out, improving business lending growth and likely NIM expansion.
Morgan Stanley analysts said BOQ remains their "least preferred smaller bank", but its second-half result and outlook commentary drove upgrades to their earnings estimates and price target. They said BOQ's better-than-expected second-half margin outcome, and guidance for expenses to be "broadly flat" in the coming year, underpinned a large upgrade to their FY25 pre-provision profit forecast.
Morningstar analysts noted that BOQ's full-year profit came in 2% of their forecast as mortgage and deposit price competition stabilised over the year. The bank's second-half net interest margin also increased modestly on the first half, helping lower the impact of weak loan growth, they said.
Macquarie analysts said BOQ "still appears expensive" and its risk profile has increased as management looks to pivot the business. They noted that BOQ remains in a "tough position" given the need to reduce expenses and improve profitability while still investing for the future.
The sources: Jarden research, Morgan Stanley research, Morningstar research, Macquarie research
