The Bank of Queensland Ltd (ASX: BOQ) share price is having a very strong day.
In morning trade, the regional bank's shares are up 8% to $7.38.
Why is the Bank of Queensland share price racing higher?
Investors have been bidding the Bank of Queensland share price higher today following the release of the bank's full year results.
For the 12 months ended 31 August, Bank of Queensland reported a 5% decline in cash earnings to $508 million. This was driven a 12-basis points reduction in its net interest margin to 1.74%, which was caused by the impacts of increasing competition and swap rate volatility.
According to a note out of Goldman Sachs, it was disappointed with the bank's performance, noting that its earnings fell short of its expectations. It said:
BOQ's FY22 cash earnings of A$508 mn were down -5% on pro-forma pcp and 5% below GSe, driven by a higher-than-expected expenses (+2% vs. GSe) and BDDs (FY22 BDD charge of A$13 mn vs. GSe A$1 mn contribution). Accordingly, PPOP was -3% lower than our estimates.
And while Bank of Queensland's final dividend of 24 cents per share came in ahead of Goldman's estimate of 23 cents, it was in line with consensus estimates.
So why are investors buying its shares?
The catalyst for the rise in the Bank of Queensland share price appears to have been its net interest margin at the end of FY 2022.
While its average for the full year fell notably year over year, its exiting net interest margin was up strongly. This could bode well for the year ahead.
Goldman Sachs stated:
The highlight of the result was that BOQ's 4Q22 NIM came in at 1.81%, well ahead of the 1.75% 2H22 average, and also our FY23E forecast of 1.78% and Visible Alpha Consensus Data forecast of 1.75%.
Are its shares a buy?
At present, Goldman has a neutral rating and $8.16 price target on the bank's shares. But that rating could change in the coming days once the broker has fully digested the results. So, investors may want to sit tight and wait for that.
