Can the BOQ (ASX:BOQ) share price hit $11 by the end of 2021?

BOQ shares are in focus after the bank released its FY21 result.

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Brokers have been thinking where the Bank of Queensland Limited (ASX: BOQ) share price could go.

The regional bank just released its FY21 result, which showed a recovery from the impacts of COVID-19 in FY20.

BOQ’s FY21 result

BOQ announced in its FY21 report that its cash earnings after tax increased 83% to $412 million. Excluding ME Bank, cash net profit was up 73% to $389 million. Cash earnings per share (EPS) grew 51% to 74.7 cents.

Statutory net profit after tax (NPAT) increased 221% to $369 million. Again excluding ME Bank, statutory profit would have risen 206% to $352 million.

The loan impairment expense was a credit of $21 million in FY21, reflecting “sound credit” and a $71 million reduction in the collective provision from the improved economic outlook and improvements in data quality relating to collateral.

Turning to the net interest margin (NIM), it rose 4 basis points to 1.95% excluding ME Bank. Including ME Bank it went up 1 basis point to 1.92%.

BOQ’s capital strength slightly increased, with the common equity tier 1 (CET1) ratio rising 2 basis points to 9.80%. The bank said that it has the capital strength to support business growth and transformation. Management said that the asset quality remains “sound” with prudent collective provisioning levels.

The board decided to pay a final dividend of $0.22 per share, an increase of $0.05 from the first half of FY21. That brought the full year dividend to $0.39 per share, representing a dividend payout ratio of 61%.

Broker thoughts on the BOQ share price

A price target signifies where a broker thinks a share price will be in 12 months from now, not just the next couple of months.

Citi has a price target of $10.50 and Morgans has a price target of $10.80. Both of them rate the BOQ share price as a buy.

Citi thinks the FY22 outlook is encouraging.

On Morgans’ numbers, BOQ is valued at under 12x FY22’s estimated earnings with an expected grossed-up dividend yield for FY22 of 7.4%.

What is the outlook?

The bank said it was cautiously optimistic that Australia remains well placed for economic recovery.

It’s focused on achieving sustainable profitable growth. It FY22 it said it’s expecting at least 2% ‘jaws’, driven by above system growth in its BOQ and Virgin Money Australia brands, and by returning ME Bank to around system growth by the end of the year.

BOQ did say it’s expecting the net interest margin to decline by around 5 basis points to 7 basis points in FY22, as competition continues and the low interest rate environment remains. It’s also expecting expenses to grow by 3% on an underlying basis to support business growth, which will be offset by accelerated integration synergies.

Its acquisition of ME Bank and the ongoing focus on its digital bank offering could be sizeable impacts on the BOQ share price in the coming years.

Management said that the integration of ME Bank is well progressed and it continues to make progress with its transformation roadmap. Over the next 12 months, the second phase of the Virgin Money digital bank will be available to customers and will include home loans and additional deposit products. Work is also well progressed on the first phase of the BOQ digital bank.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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