Morgan Stanley envisages ongoing challenges for the bank’s retail network because of weak mortgage loan growth, downward pressure on margins and the need for significant investment. Another dividend reduction is probable if profitability continues to fall.
Management has lowered the risk profile, but the broker observes the business loan book is now growing faster than housing and collective provisioning becomes more pro-cyclical under new accounting changes. So, a deterioration in the economy would translate to larger and faster provisioning increases.
Underweight rating. Industry view is In-Line. Price target is $8.40.
Target price is $8.40.Current Price is $9.88. Difference: ($1.48) – (brackets indicate current price is over target). If BOQ meets the Morgan Stanley target it will return approximately -18% (excluding dividends, fees and charges – negative figures indicate an expected loss).