If you're interested in gaining exposure to the banking sector, then it could be worth considering Bank of Queensland Limited (ASX: BOQ) shares.
That's the view of the team at Goldman Sachs, which see a lot of value in the regional bank's shares at the current level.
What did Goldman say about Bank of Queensland's shares?
According to a recent note, the broker has retained its buy rating and put a $9.67 price target on the bank's shares.
Based on the current Bank of Queensland share price of $7.71, this implies potential upside of 25% over the next 12 months.
In addition, the broker is forecasting a fully franked 44 cents per share dividend in FY 2022. If you add this 5.7% dividend yield into the equation, the total potential return on offer is approximately 31%.
Why is the broker bullish?
Goldman Sachs was pleased with the bank's recent annual general meeting update and notes that management has reaffirmed its FY 2022 guidance of at least 2% positive jaws (revenue growth versus expense growth).
The broker 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."
In addition, Goldman highlights that it likes the regional bank due to its margin pressure offsets, the ME Bank acquisition, and its attractive valuation.
"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. Coupled with 33% TSR [now ~31%] to our revised TP, we stay Buy," it added.
