The Bank of Queensland Limited (ASX: BOQ) share price could outperform next week when it unveils its profit results.
That is if the bank meets Goldman Sach's earnings expectations with the broker reiterating its "buy" recommendation on the ASX bank.
Never mind that Goldman was involved in its recent controversial capital raising. I'm just saying.
BOQ profit results sets scene for other ASX banks
But the Bank of Queensland's first half profit report is worth paying attention to for another reason.
It's the first in the sector to kick off the ASX bank reporting season. Its update could set the mood for its peers.
The Westpac Banking Corp (ASX: WBC) share price, National Australia Bank Ltd. (ASX: NAB) share price and Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price will also be closely watched as they hand in their report cards in the first week of May.
BOQ's earnings and dividend forecast
Coming back of Bank of Queensland, Goldman has high hopes for the east coast lender as it believes its profit margin and bad debt could positively surprise.
The broker is forecasting the bank to produce a 9% increase in 1HFY21 cash earnings to $164 million and an interim dividend of 17 cents a share. The last time the bank paid an interim dividend was 2019.
"BOQ management expects NIM [net interest margin] to be up c.3bps on 2H20 and slightly positive overall in FY21," said the broker.
"In addition to this, we see potential for near term funding cost tailwinds given the current level of deposit repricing already announced (with room for further repricing) and BOQ's ability to drawdown on its remaining allotment of Term Funding Facility."
Margins and bad debt tailwinds
NIM is a key profitability indicator that investors watch. It represents how much the bank charges borrowers and how much it has to pay for funds to lend out. Goldman expects Bank of Queensland's NIM to increase by 3 basis points (bps) to 1.96% in the first half.
The bank could also please investors on bad debt provisioning. That's the amount of profits a bank puts aside to cover risky loans.
"Our current forecast for 1H21E BDDs is at 10bp of total loans, consistent with what BOQ pre-announced," explained Goldman.
"In light of the continued improvement in asset quality, coupled with recent industry trends, we will be particularly interested on whether BOQ follows this trend."
The ASX bank winning market share
But these aren't the only potential tailwinds for the Bank of Queensland share price. The broker believes it was winning market share in the home loan war in 1HFY21.
"Housing loan growth should be above system with BOQ expecting 1H21 annualised housing loan growth of 5%, and slightly negative to flat business loan growth," added Goldman.
"We will be interested in management commentary around the sustainability of this better than system growth."
Goldman's 12-month price target on the BOQ share price is $9.68 a share.
The bank reports its results on April 15.
