Why are BOQ shares falling on a rumoured sale?

What is happening with the Bank of Queensland?

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The Bank of Queensland Ltd (ASX: BOQ) share price closed 1.15% lower today at $6.04 amid rumours the ASX bank share may be planning to sell one of its divisions.

But it was not the only bank share to dip on Wednesday. Shares in the Commonwealth Bank of Australia (ASX: CBA) were down almost 1% at the close of trade, while the ANZ Group Holdings Ltd (ASX: ANZ) and National Australia Bank Ltd (ANZ: NAB) share prices also slipped into the red.

The chart below shows that the BOQ share price has dropped by around 30% over the last three years.

Is the way forward for the bank to divest and simplify so that it can focus on its core offering of lending and term deposits? Time will tell.

Potential sale of auxiliary business unit

According to reporting by The Australian, speculation has been mounting that the Bank of Queensland is moving toward the sale of a business it bought from Investec almost 10 years ago. The business came with $2.4 billion in loans and $2.7 billion in deposits.

The acquisition — offering Australian professional finance, asset finance and leasing, and mostly servicing dentists and doctors — reportedly cost $440 million.

The Australian reported that analysts believed regional banks were under pressure to simplify their businesses, noting that Bendigo and Adelaide Bank Ltd (ASX: BEN) recently sold its stake in Homesafe and planned to sell out of Cuscal when it floats.

Upcoming report

BOQ will report its FY24 half-year results and dividend next week (17 April).

As my colleague James Mickleboro reported recently, broker Goldman Sachs expects cash earnings of $154 million from BOQ. That net profit is 6.1% lower than the consensus of analyst expectations of $164 million.

Goldman Sachs also tipped an interim dividend of 16 cents per share. This is 7.5% lower than the market's expectation (17.3 cents per share) and would represent a 20% decrease year over year.

The broker thinks the net interest margin (NIM) could disappoint, as well as a smaller-than-expected loan book.

Broker UBS is also negative on the ASX bank share. It has a sell rating on the bank, with a price target of $5 – that implies the BOQ share price could fall this year by around 17% from where it is today.

UBS suggested BOQ could generate earnings per share (EPS) of 44 cents, which would imply the current BOQ share price is valued at 14x FY24's estimated earnings. However, the bank could then achieve EPS growth each year between FY25 and FY28 until it reached an EPS of 66 cents in the 2028 financial year.

Of course, these broker forecasts about profit and share price are educated guesses — BOQ could perform much better or worse than expected.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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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