Bank of Queensland (ASX:BOQ) among the latest buy ideas from brokers

The Bank of Queensland Limited (ASX: BOQ) share price rallied after two brokers upgraded the stock. But it’s the only upgrade candidate.

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The Bank of Queensland Limited (ASX: BOQ) share price rallied today after two brokers upgraded the stock. But it’s not the only ASX stock to get boosted to a “buy” today.

The BOQ share price extended yesterday’s gain by 2.5% to $6.90 ahead of the close when the S&P/ASX 200 Index (Index:^AXJO) gained 0.7%.

The bank jumped by over 5% on Wednesday after it posted a pleasing full year result. This prompted Credit Suisse to lift its recommendation on the stock to “outperform” from “neutral” as it increased its 12-month price target to $7.60 from $5.50 a share.

Cost control and margins prompt broker upgrade

The broker was impressed with the bank’s strong cost control in a tough environment and the 3 basis point uplift in its second-half net interest margin (NIM).

Management also managed to deliver a CET1 ratio of 9.78%. This is ahead of its cash buffer target range of 9% to 9.5%.

“With this result, we now see the downside to be limited with a COVID‐19 provision conservatively set together with good execution of strategy delivering underlying profit growth,” said the broker.

Downside risks limited

But Credit Suisse isn’t the only broker upgrading the stock. Morgans changed its recommendation to “add” from “hold” as the bank’s cash earnings of $225 million was 4% ahead of its expectations.

“While we have not materially changed our credit impairment charge forecasts for FY21F and FY22F, and despite our forecasts being more optimistic than FactSet consensus, we believe our forecasts are starting to look conservative in light of emerging data,” said Morgans.

The broker’s 12-month price target on the stock increased to $7.20 from $5.50 a share.

Challenger upgraded due to better than expected quarterly

Meanwhile, the Challenger Ltd (ASX: CGF) share price also benefitted from a broker upgrade today.

Bell Potter upped its rating on the annuity products company to “buy” from “hold” following its September quarterly update.

“We do this due to the strong sales figures in its Life business in addition to the robust net-flows it’s seeing on the Funds Management side,” said the broker.

“CGF flagged improving margin through a more attractive asset allocation and the capital position remains higher than target ratios.”

Blowing past estimates

The group’s sale of life insurance was more than twice Bell Potter’s estimate of $100 million for the quarter.

Its fixed-Term annuities (ex MS&AD) sales of $634 million also blew past the broker’s $330 million estimate.

Bell Potter increased its price target on Challenger to $4.70 from $4.20 a share.

The CGF share price jumped 2.6% on Thursday to $4.40.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited. 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.

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