Morgan Stanley believes margins are turning lower and reduces second half forecasts for margins by -5 basis points, given greater front book competition and wider spreads.
In the absence of new home loan back book re-pricing, the broker believes there is further downside to forecasts if current wholesale funding costs persist. The broker notes a strong record of cost control but expects loan losses will increase.
Underweight maintained. Target is reduced to $10.30 from $11.00. In-Line industry view retained.
Target price is $10.30.Current Price is $10.66. Difference: ($0.36) – (brackets indicate current price is over target). If BOQ meets the Morgan Stanley target it will return approximately -3% (excluding dividends, fees and charges – negative figures indicate an expected loss).