The Bank of Queensland Ltd (ASX: BOQ) share price could have some additional upside potential, according to a broker note posted this morning.
Shares of the Queensland bank currently trade for $6.96 each, up 0.71%, after closing yesterday at $6.91 a share.
Let's look into why these shares could be undervalued.
Regional banks could be undervalued compared to major banks
UBS analyst John Storey said regional banks, such as Bank of Queensland, are currently undervalued due to their positive fundamentals and the selloff in their share prices, as originally reported by The Australian.
Storey gave Bank of Queensland a price target of $8 per share — that's a 14.94% upside at the time of writing.
The rationale behind his analysis was that regional banks could see a 50-100 basis points increase in their return on equity (ROE) forecasts from higher leveraged balance sheets. ROE is a key ratio of how effectively companies generate profits from their existing assets, such as capital.
The Bank of Queensland share price has lost 13% over the last six months, taking a particularly steep fall in June when it crashed 11% in a single month. This makes it potentially undervalued relative to its previous trading levels, assuming there have been no changes in its fundamentals.
Bank of Queensland share price snapshot
Shares in Bank of Queensland are currently down 16% year to date. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is down around 8% over the same period.
The company's current market capitalisation is around $4.5 billion.
