Shares in Bank of Queensland Limited (ASX: BOQ) are rangebound today after spiking into the green as the gates opened for trading today.
At the time of writing, the Bank of Queensland share price is charging less than 1% higher and is fetching $7.84 in early trading.
The bank's share price collapsed from its 52-week high of $9.74 back in October and hasn't managed to recover to that level since – even after thrusting from lows of $7.60 in December
Even with the pullback in share price, the team at JP Morgan is heavily bullish on Bank of Queensland, noting it is "well positioned to deal with industry headwinds" in its outlook for the ASX banking sector in 2022. Let's take a closer look.
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Why's JP Morgan bullish on Bank of Queensland?
The broker ranks Bank of Queensland amongst its top banking picks within its coverage universe. JP Morgan reckons the bank is set to absorb industry-specific headwinds better than its peers in 2022 for a number of reasons.
For instance, the bank has funding cost savings from "Term Funding Facility and deposits costs which have further to fall than peers", the broker says.
Not only that but JP Morgan is excited about the bank's growth and efficiency prospects following its recent ME Bank acquisition.
This has "potential for optimisation in both its own deposit book and the funding mix of ME Bank", according to the firm.
Folding this acquisition, alongside the bank's digitisation efforts and strengths in its term deposit book, JP Morgan estimates a return on tangible equity (ROTE) of 10.3% for Bank of Queensland this year.
With these drivers in mind, plus the recent pullback in share price, analysts at the firm believe that investors are overlooking key growth levers that the Bank of Queensland has in place, especially following the ME Bank acquisition.
Whilst it acknowledges successful integration of ME Bank into the Bank of Queensland's portfolio is a tedious task, the firm is also perplexed as to why the market is under-appreciating the potential there.
"We argue that, given the large valuation discount vs peers, the market is not paying for synergies from the ME
Bank acquisition, albeit we acknowledge that this will require careful execution, given the already-full transformation/fix agenda", the broker said.
As such, analysts with JP Morgan maintained their overweight rating on the stock, urging clients to buy in or to allocate more weight within portfolios if already holding.
The broker values Bank of Queensland at $9.80 per share, suggesting an upside potential of 25% at the time of writing.
Bank of Queensland share price summary
The Bank of Queensland share price has struggled lately after tumbling from its former highs in late 2021. As such, it has lost more than 1% in the past 12 months and is down more than 3% to start off the new year.
Despite the calamity, shares have regained support this week and are now up 3% in the past 5 days of trading, although trading volume has been slim compared to the monthly average.
