The Bank of Queensland Limited (ASX: BOQ) share price is having a tough month.
Since the start of April, the regional bank's shares have fallen 8% to $7.96.
Why is the Bank of Queensland share price down 8% this month?
Investors have been selling down the Bank of Queensland share price in response to the bank's half year results.
While the bank reported stronger earnings than the market was expecting, this was driven largely by lower bad debts and thus the quality of its earnings were not as great as they first appeared.
Nevertheless, the team at Citi remain positive on the company and continue to see significant value in the Bank of Queensland share price.
According to a note, the broker has put a buy rating and $10.25 price target on its shares. This implies potential upside of 29% for investors over the next 12 months.
In addition, Citi is forecasting a fully franked 49 cents per share dividend in FY 2022 and 56 cents per share dividend in FY 2023. This equates to yields of 6.1% and 7%, respectively, which stretches the total potential return to over 35%.
What did the broker say?
Citi doesn't believe the selloff of the Bank of Queensland share price post-results was justified. It commented:
"Was a ~6% share price sell-off justified for BOQ on 14th Apr after it delivered an inline 1H22 pre-provision profit result, with a ~9% beat at the cash earnings line?
This result was compositionally weaker than expected, but we think investors are more concerned about 1) BOQ's revenue growth compared to peers in a higher cash rate environment; 2) Cost base trajectory following the ME acquisition; and 3) the capital intensity of the business resulting in the need to use discounted DRPs to fund near-term growth.
Despite our expectations for weaker than peer revenue growth as rates rise, we are maintaining a Buy recommendation for BOQ. The current P/BV of just 0.80x and dividend yield of >6% are too low for a bank that delivers ~9.0% cash ROE, which is in-line with its cost of equity, as well as being forecast to deliver a single-digit earnings and dividend growth profile."
