Why Goldman Sachs put a sell rating on Bank of Queensland shares

There may be better options out there for investors looking at the banking sector.

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Now could be the time to sell Bank of Queensland Ltd (ASX: BOQ) shares.

That's the view of analysts at Goldman Sachs, which have become bearish on the regional bank.

What is the broker saying about Bank of Queensland shares?

According to a note, the broker has put a sell rating and $5.59 price target on the bank's shares.

And while this is only a touch lower than where its shares currently trade, investors have an opportunity cost to consider.

For example, Goldman prefers ANZ Group Holdings Ltd (ASX: ANZ) shares and has a buy rating and a $27.25 price target on them. This implies almost a 9% upside from current levels and doesn't include the 6.5% dividend yield its analysts are forecasting in FY 2024.

Why is Goldman bearish?

The broker has named three key reasons why it is bearish on Bank of Queensland and its shares. It explains:

We are Sell-rated on BOQ given: i) while the company's transformation program is the right long-term strategy to deliver a strong and simpler bank, we believe it does leave the bank more exposed to inflation in third party distribution costs, ii) while management appears to be responding to these issues and will announce details of a productivity initiative at its FY23 result, we are concerned by the operational risks and costs pressures involved in undertaking such an initiative, iii) BOQ's volume momentum remains weak, and while this is partly due to management's efforts to protect profitability, BOQ is the only FY24 NIM that Visible Alpha consensus currently expects to be below where forecasts were at the beginning of 2021, before rates started to rise.

It is also worth noting that Goldman is forecasting a softer-than-expected FY 2023 result next week from the regional bank. It is predicting:

FY23E cash earnings down -7.7% on pcp to A$453 mn vs. VA consensus of A$476 mn. : 2H23 final DPS of A20¢ vs. VA consensus of A21¢.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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