A number of brokers think that the Bank of Queensland Limited (ASX: BOQ) share price is an interesting one to think about. Indeed, they rate the bank as a buy.
Buy ratings on the BOQ share price
Credit Suisse is one of the brokers that likes BOQ shares right now. It has a price target of $11.50 on the business. That implies that the company's share price could rise by around 20% over the next year if the broker is right.
Another broker that likes the regional bank is the broker Morgan Stanley which has a price target of $10.50 on the company. That target implies an increase of the BOQ share price of around 10% over the next 12 months.
Why do brokers like the bank?
Credit Suisse points to the deal to buy the ME bank as an important factor to consider the regional bank.
In February 2021, BOQ announced it was going to buy ME Bank for $1.325 billion. That acquisition has now been completed. Management believe it is creating a compelling alternative to the big banks. It funded the deal with a $1.35 billion capital raising.
The BOQ share price jumped 13% in the initial reaction to the deal.
The bank said that it is a transformational acquisition which is strategically aligned. It is expected to deliver material scale, broadly doubling the retail bank and providing geographic diversification.
Management believe that BOQ and ME Bank are strong complementary trusted brands, with shared customer-centric cultures and differentiated customer segments. BOQ thinks there is a clear pathway to a scaled, common, cloud-based digital retail bank technology platform.
BOQ says that the deal is financially compelling. It's expected to be accretive for earnings per share (EPS) in the low double-digit to mid-teens including full run-rate synergies in the first year, being FY22.
It's also expected to add to cash return on equity (ROE) by over 100 basis points including full run rate synergies in the first year. BOQ expects to achieve annualised pre-tax synergies of $70 million to $80 million.
Recent BOQ share price performance and results
Since the announcement of the ME Bank acquisition, the BOQ share price has gone up 14%. Though there has certainly been some volatility since then.
The first six months of FY21 showed that BOQ made $165 million of cash earnings after tax, which was an increase of 9%.
The statutory profit after tax grew by 66% to $154 million. BOQ's net interest margin (NIM) improved by 3 basis points to 1.95%. The board of BOQ decided to increase the interim dividend by 11 cents per share to 17 cents per share.
BOQ share price valuation
Using the projection by Credit Suisse, BOQ shares are valued at 15x FY22's estimated earnings.
Morgan Stanley thinks that the BOQ share price is valued at 13x FY22's estimated earnings.
