The Bank of Queensland Limited (ASX: BOQ) share price has been a strong performer today.
In afternoon trade, the regional bank's shares are up 5.5% to $8.02.
Why is the Bank of Queensland share price pushing higher?
The Bank of Queensland share price is rising today after investors responded positively to the release of a trading update ahead of its annual general meeting.
According to the release, the regional bank's growth momentum has continued throughout the first quarter of FY 2022. It reported strong application volumes across both the housing and business lending portfolios.
And while the bank has revised its net interest margin guidance lower, this didn't appear to come as a surprise to the market following recent updates from the big four banks.
Furthermore, management is aiming to offset this margin weakness with a 1% reduction in expenses in FY 2022 through additional productivity benefits. All in all, this means that its full year guidance of at least 2% positive jaws (income growth exceeding expense growth) remains in place.
What was the reaction?
Analysts at Goldman Sachs have responded positively to the update. As a result, the broker has reiterated its buy rating and lifted its price target slightly to $9.67.
Based on the current Bank of Queensland share price, this implies potential upside of ~20% for investors.
In addition, Goldman is forecasting a fully franked ~44 cents per share dividend in FY 2022. This implies a 5.5% yield, bringing the total return on offer to ~26%.
Goldman commented: "Our recently revised FY22E revenue growth on pro-forma FY21A had been 1.2% and costs of -0.4%. This compares to their updated implied revenue growth guidance of +1% (i.e. at least 2% positive jaws guidance) and expenses of -1%. Therefore, with costs run-rating mildly better than we had expected, we make minor revisions to our FY22/FY23/FY24E EPS of +0.5%/+0.4/+0.1% and our TP moves to A$9.67 from A$9.66."
"Overall we maintain our Buy recommendation on BOQ, which we believe has more offsets to these mortgage NIM pressures in the form of i) BOQ's more rate sensitive deposit book, and ii) the continued delivery of ME Bank synergies," it concluded.
