The Bank of Queensland Limited (ASX: BOQ) share price has come under pressure on Wednesday and is dropping lower again.
The regional bank's shares are down over 2% to $5.75 in afternoon trade.
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Is this a buying opportunity for investors?
While I see more value in some of the big four banks and would sooner buy their shares, one broker that thinks this is a buying opportunity is Goldman Sachs.
This morning the broker retained its buy rating but trimmed the price target on the bank's shares to $6.85. This follows Bank of Queensland's provisions update this week.
The broker's price target implies potential upside of 19% for its shares over the next 12 months, excluding dividends.
Including dividends this increases to approximately 24% based on its dividend estimates.
Why is Goldman Sachs positive on Bank of Queensland?
Goldman commented: "BOQ has announced that it expects its FY20 loan impairment expense (LIE) will be A$175 mn, including a COVID-19 related collective provision of A$133 mn. While we had sat above BOQ's previous guidance on its COVID-19 provision, today's LIE update is still c. A$25 mn higher than our previous forecast. Furthermore, BOQ has announced that an A$11 mn expense will be taken at the FY20 result (due on 14 October) resulting from a proactive review of historical employee pay and entitlements."
And while this has led to the broker reducing its earnings estimates, it still sees a lot of value in its shares at the current level.
It explained: "We think BOQ provides good exposure to the lower basis risk and falling deposit costs that we are currently seeing in the market and its capital position remains solid, with our Aug-20 CET1 ratio forecast to be 10.0%. Therefore, with our revised TP offering 15% [now 24%] total shareholder return, we stay Buy."
