Macquarie downgrades its rating for Bank of Queensland to Neutral from Outperform due to increased competition and because lower deposit pricing has resulted in very slow deposit growth. It’s also felt the bank has relatively lower leverage lower to higher rates.
The target price falls to $9 from $9.25 as the broker sees increasing risk of mortgage margin impacts and a deposit cost blowout as the bank’s funding gap widens.
Overall, Macquarie expects the Bank sector to consolidate at current levels given near-term results are likely to disappoint due to weaker margins. While volume growth remains solid, it is slowing, and competitive pressures are expected to remain intense.
Mortgage competition has shifted to variable rates due to higher rates, explains the analyst. Also, higher term deposit costs and
switching are expected to limit the upside from those higher rates.
Sector: Banks.
Target price is $9.00.Current Price is $8.49. Difference: $0.51 – (brackets indicate current price is over target). If BOQ meets the Macquarie target it will return approximately 6% (excluding dividends, fees and charges – negative figures indicate an expected loss).
