Why are BOQ shares falling on a rumoured sale?

What is happening with the Bank of Queensland?

| More on:
A man thinks very carefully about his money and investments.

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

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.

More on Share Market News

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Share Fallers

Why did the Core Lithium share price just crash 6%?

Investors are bidding down the Core Lithium share price today.

Read more »

Sports fans looking at smart phone representing surging pointsbet share price
Share Gainers

Guess which ASX All Ords share just rocketed 25% on an earnings upgrade

Investors are bidding up the ASX All Ords share following an improved FY 2024 earnings outlook.

Read more »

Young man sitting at a table in front of a row of pokie machines staring intently at a laptop. looking at the Crown Resorts share price
Mergers & Acquisitions

Are Star shares now rolling the dice on a rescue bid?

Rumour is that a US-based casino operator is ready to revamp this fallen star.

Read more »

A man closesly watch a clock, indicating a delay or timing issue on an ASX share price movement
Mergers & Acquisitions

BHP shares charging higher as the clock ticks down on the Anglo American takeover

BHP has less than three days before the clock runs down on its $64 billion Anglo American takeover bid.

Read more »

A bored woman looking at her computer, it's bad news.
Share Market News

These are the 10 most shorted ASX shares

Let's see which shares short sellers are targeting this week.

Read more »

A cool young man walking in a laneway holding a takeaway coffee in one hand and his phone in the other reacts with surprise as he reads the latest news on his mobile phone
Broker Notes

Morgans says these ASX stocks can rise 20% (and pay big dividends!)

The broker believes some very big returns could be on the cards over the next 12 months.

Read more »

A happy male investor turns around on his chair to look at a friend while a laptop runs on his desk showing share price movements
Share Market News

5 things to watch on the ASX 200 on Monday

A positive start to the week is expected for Aussie investors.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.

1 overlooked ASX growth stock I'm chasing for multibagger potential

I believe this stock can create strong returns in the years ahead.

Read more »