Bank of Queensland Ltd (ASX: BOQ) shares closed on Friday at $5.75 apiece, down 0.52%.
The S&P/ASX 200 Index (ASX: XJO) closed slightly higher at 7,068.8 points, up 0.051%.
Top broker Macquarie has issued a note on bank shares claiming regional banks are disadvantaged due to their smaller scale in today's inflationary economy.
Let's review what the broker said.
Macquarie downgrades regional banks
According to reporting in The Australian, Macquarie has downgraded Bank of Queensland shares from a neutral rating to underperform.
The broker forecasts higher expenses and impairments will put pressure on the bank's bottom line.
Macquarie estimates the Bank of Queensland's cash profit level for FY23 to FY25 will be 2% to 9% below consensus.
It also notes that the Bank of Queensland is seen "as a subscale operating in an inflationary environment with limited scope to realise scale benefits when investing".
Macquarie explained:
On balance, we see the risk reward trade-off skewed to the downside.
Despite offsets from investment normalisation and ME synergies persisting, we see BOQ's expense growth as an issue.
Macquarie also thinks fellow regional bank Bendigo and Adelaide Bank Ltd (ASX: BEN) will face higher expenses of between 2% and 4% above consensus in FY24 to FY26.
The broker also downgraded Bendigo Bank from neutral to underperform.
Macquarie said:
Additionally, we note that in an environment of normalising deposit competition and higher inflationary impacts, we see BEN as a subscale operator with additional margin impacts from the community banking revenue share arrangement as well as replicating portfolio benefit run off, with benefit unwind greater than peers in FY25/FY26.
Bank of Queensland shares vs. big four banks in 2023
Bank of Queensland shares have underperformed the big four ASX 200 banks in 2023 so far, falling 15% in the year to date.
By comparison, shares in Westpac Banking Corp (ASX: WBC) are down 7%, and the National Australia Bank Ltd (ASX: NAB) share price has dropped 2%.
Shares in Commonwealth Bank of Australia (ASX: CBA) have slipped 1%, while ANZ Group Holdings Ltd (ASX: ANZ) shares are trading 9% higher.
The Bendigo Bank share price has fallen 7%.
