This ASX 200 bank share could drop 20%!

Goldman Sachs is feeling bearish about this bank stock.

| More on:
A businesswoman holding a briefcase rests her head against the glass wall of a city building, she's not having a good day.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Bank of Queensland Ltd (ASX: BOQ) shares are under pressure on Tuesday afternoon.

At the time of writing, the ASX 200 bank share is down over 1% to $6.12.

Why is this ASX 200 bank share falling?

The weakness in the Bank of Queensland share price today could have been driven by a bearish broker note out of Goldman Sachs this morning.

According to the note, the broker believes investors should be selling the ASX 200 bank share ahead of the release of its half-year results release later this month.

Goldman is expecting the bank's earnings to come in well short of expectations during the first half.

For example, its analysts have pencilled in cash earnings of $154 million for the half. This is 6.1% lower than the consensus estimate of $164 million.

In light of this, it also expects the ASX 200 bank share's dividend to disappoint. Goldman is forecasting an interim dividend of 16 cents per share, which is 7.5% lower than the consensus estimate of 17.3 cents per share.

This is expected to be driven by a combination of lower than consensus average interest earning assets and a softer than expected net interest margin (NIM).

Major downside

Goldman has reiterated its sell rating with a price target of $5.04. Based on where the ASX bank share currently trades, this implies 18% downside for investors.

Its analysts explained their bearish stance of Bank of Queensland. They said:

BOQ is an Australian bank offering retail and commercial banking, financial services and insurance. 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, and ii) we are concerned by the operational risks and costs pressures involved in undertaking such an initiative, furthermore iii) BOQ's volume momentum remains weak, and while this is partly due to management's efforts to protect profitability, BOQ's FY23/2H23 NIM fell materially (notably below market expectations) and we do not expect margin pressures to ease given the current challenging environment (intense competition in both lending and deposits). Our 12-month target price offers downside to the current share price, towards the bottom end of our A&NZ Financials coverage.

All in all, the broker feels that this is one ASX 200 bank share that investors should stay away from right now.

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.

More on Bank Shares

Woman calculating dividends on calculator and working on a laptop.
Dividend Investing

What's the dividend yield of NAB shares right now?

What’s the size of NAB’s payout?

Read more »

A woman standing on the street looks through binoculars.
Bank Shares

Here is the earnings forecast through to 2026 for ANZ shares

Dividend investors will be keen to see what's on the horizon for ANZ.

Read more »

Happy man working on his laptop.
Bank Shares

ASX 200 bank stock smashing the benchmark on Friday as a key metric strengthens

Investors are sending the ASX 200 bank stock surging on Friday. But why?

Read more »

A woman in a bright yellow jumper looks happily at her yellow piggy bank representing bank dividends and in particular the CBA dividend
52-Week Highs

Why is the CBA share price setting a new all-time high today?

Australia's biggest bank just became more expensive. What is driving the demand?

Read more »

Bank building with the word bank in gold.
Bank Shares

Here's what Wilsons is saying about ANZ, CBA, NAB, and Westpac shares

What are its analysts saying about the big four banks following their updates?

Read more »

A man looking at his laptop and thinking.
Bank Shares

Is the CBA share price heading back to $100?

This bank stock may be overvalued and headed down according to one broker.

Read more »

Hand with Australian dollar notes handing the money to another hand symbolising ex-dividend date.
Bank Shares

Here's the ANZ dividend forecast through to 2026

The banking giant will be paying its latest dividend soon. But what will come next?

Read more »

A businesswoman exhales a deep sigh after receiving bad news, and gets on with it.
Bank Shares

Why is the ANZ share price sinking today?

Is today's decline actually good news for investors?

Read more »