Citi upgrades the banking sector to Buy. Even in a severe bad debt scenario the current crisis is not likely to de-stabilise the sector such as what occurred in the GFC.
Citi lowers cash earnings forecasts for Bank of Queensland by -10% for FY20 but upgrades FY21 and FY22 by 9-11%.
The broker believes the bank should benefit from industry-wide mortgage repricing amid less sensitivity to cash-linked small and medium enterprises. Bad debts may weigh, nevertheless.
Rating is upgraded to Buy from Neutral and the target reduced to $6.50 from $7.75.
Target price is $6.50.Current Price is $4.85. Difference: $1.65 – (brackets indicate current price is over target). If BOQ meets the Citi target it will return approximately 25% (excluding dividends, fees and charges – negative figures indicate an expected loss).