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Bank of Queensland: what’s the outlook as FY20 guidance is withdrawn?

'We have a strong balance sheet with solid capital and funding, and robust risk management,’ said BOQ’s Chief Executive, George Frazis.

The Bank of Queensland (BOQ) today joined a growing list of companies who have withdrawn their full-year guidance as a consequence of the coronavirus pandemic.

'Due to the highly uncertain environment and associated challenges in providing accurate forecasts for this year, BOQ believes it is prudent to withdraw [its] FY20 guidance.'

Even so, amid broad market gains, the BOQ share price rose an impressive 5.64% during Monday’s trading session, to close out the day at $5.05 per share.

The announcement at a glance

Besides withdrawing its full-year guidance, the Bank of Queensland today reiterated that its capital and funding positions remain strong. Indeed, as a result of the bank’s recent cap raise, BOQ currently boasts an impressive pro forma FY19 CET1 ratio of 10.07% – putting the regional bank 'in excess of APRA's unquestionably strong capital requirements.'

'BOQ's funding position will also be further enhanced by the provision of the RBA term funding facility to support customers with new lending,’ the bank added.

Finally, in response to today’s announcement, BOQ’s Managing Director and CEO, George Frazis said:

'We have a strong balance sheet with solid capital and funding, and robust risk management. We will support our customers in any way we can, especially at a time when some are feeling at their most vulnerable. We are here for our customers and will work with them through the challenges ahead.'

Bank of Queensland share price: the analyst take

In light of recent share price declines – Citibank last week upgraded its ratings on all of Australia’s banks (including the regionals) – to a Buy.

Overall, Citi believes that the Covid-19 pandemic is a 'transitory economic shock' and that ultimately, the recent sell-off we have witnessed in the banks was overdone.

In the case of the Bank of Queensland, though Citi’s rating has shifted from Neutral to Buy; its 12-month price target has actually been lowered from $7.75 per share to $6.50 per share.

Even so, at current price levels, for equity holders such a price target implies potential upside of ~30%.

Mind you, it's not all positive, with Citi indicating that:

‘While already assuming a dividend cut in our 1H20E forecasts (to 25cps), we now assume that the dividend gets further rebased in 2H20E from bad debt pressure to 20cps (~20% cut).’

Ultimately, though BOQ’s bad debt position may prove problematic in the short-term, the regional bank ‘should benefit from industry wide mortgage repricing and less sensitivity to cash linked SME,’ Citi said.

How to trade the Bank of Queensland

Where do you stand: are you bullish or bearish on BOQ’s prospects? Trade accordingly. You can use CFDs to trade the Bank of Queensland and other financial stocks – LONG or SHORT through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) Bank of Queensland, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter ‘BOQ’ or ‘Bank of Queensland’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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