Is the Bank of Queensland share price in the buy zone?

Is it time to buy Bank of Queensland Limited (ASX:BOQ) shares?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It certainly has been a disappointing year for the Bank of Queensland Limited (ASX: BOQ) share price.

Since the start of the year the regional bank's shares have risen less than 1%.

As a comparison, the S&P/ASX 200 is up almost 18% and the Westpac Banking Corp (ASX: WBC) share price is up over 16%.

Why is the Bank of Queensland share price underperforming?

It has been a turbulent year for the bank. Not only has it had a change of chief executive officer, it has seen both its chairman and chief financial officer resign.

Changes of this magnitude in the c-suite rarely go down well with the market. This is because they are often interpreted as a sign that things are not quite right behind the scenes.

Furthermore, also weighing on its shares this year has been news that ASIC has commenced proceedings against it in the Federal Court of Australia. The regulator alleged that certain terms used by the bank in contracts with small businesses are unfair.

But perhaps the biggest weight on its share price has been its performance in FY 2019. In the first half the bank reported a disappointing 8% decline in half year cash earnings.  This poor performance led to Bank of Queensland cutting its interim dividend by 10.5% to 34 cents per share.

Unfortunately for shareholders, management warned that the second half wouldn't be any better.

Should you invest?

Whilst its shares do look good value at these levels, I wouldn't rush in and invest. After all, next week the bank will release its full year results.

According to a note out of Goldman Sachs, it believes Bank of Queensland's mortgage book continues to underperform. In fact, it expects the bank to report its seventh consecutive half of below system growth. The broker also has concerns over its margins after the cash rate cuts.

In light of this, Goldman has reiterated its sell rating and $8.74 price target. This implies potential downside of ~9.5% for its shares over the next 12 months. So, patient investors might be able to get in at even lower prices in the coming weeks or months.

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

A corporate female wearing glasses looks intently at a virtual reality screen with shapes and lights representing Block shares going up today
Bank Shares

Are Westpac shares a buy following the bank's big tech update?

Is now a good time to buy the banking giant's shares? Let's find out.

Read more »

Different Australian dollar notes in the palm of two hands, symbolising dividends.
Bank Shares

Own CBA shares? It's payday for you!

A dividend is heading to CBA shareholders’ bank accounts.

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Bank Shares

Are CBA shares really worth $120?

It has been a good year for ASX bank shareholders.

Read more »

a group of people sit around a computer in an office environment.
Bank Shares

Westpac shares push higher on $9.8b technology simplification plan

Westpac plans to spend big on technology to close the gap on its rivals.

Read more »

A worried woman looks at her phone and laptop, seeking ways to tighten her belt against inflation.
Economy

NAB boss issues dire prediction for Aussie economy

NAB’s CEO has issued a stark warning on the outlook for Australia’s economic growth.

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Bank Shares

Own CBA shares? Here's the tech stock the banking giant just invested in

CBA has made an interesting investment. Here's what you need to know.

Read more »

A woman gives two fist pumps with a big smile as she learns of her windfall, sitting at her desk.
Bank Shares

ANZ shares charge higher on $57.5 million class action settlement news

ANZ shares have continued their positive run on Monday.

Read more »

Two people comparing and analysing material.
Bank Shares

Better buy: CBA or Westpac stock?

Which ASX bank share is a better buy?

Read more »