The Bank of Queensland Ltd (ASX: BOQ) share price recorded a much-needed gain on Wednesday.
The regional bank's shares closed the day 1% higher at $5.46.
However, this doesn't change much on a year-to-date basis. The bank's shares remain down a disappointing 21% since the turn of the year.
In light of this, investors may be wondering if Bank of Queensland's shares are now in bargain territory. Is this the case?
Is the Bank of Queensland share price in bargain territory?
According to a recent note out of Citi, its analysts see value in the bank's shares at the current level. However, not quite enough to justify a buy rating.
The broker has a neutral rating and $6.00 price target on its shares. Based on the latest Bank of Queensland share price, this implies potential upside of just over 9% for investors.
In addition, the broker is expecting fully franked dividend yields of just over 7% each year through to at least FY 2025. This boosts the 12-month potential return to over 16%.
Commenting on its recent results release, the broker said:
BOQ's 1H23 result indicated an earlier peak in revenue momentum while costs surprised to the upside. Growing revenue faster than costs is the key to expanding ROE, yet with this result BOQ moved further away from their long-term aspirations of ROE >9.25%, yet curiously they affirmed this target. We think the hint of a broader rethink on costs, to be unveiled later in the year, confirms the change in revenue outlook since the target was first unveiled, with the material mortgage retention repricing likely to blame.
Ultimately, we think management's target is unachievable, and will be walked away from, particularly given the complications from the difficult macro environment and having an interim management team. While the near-term looks difficult, arguably the shares are factoring in a much lower terminal ROE, and we retain our Neutral view. A 6% dividend yield provides adequate comfort for the patient to see this through.
