It's been a disappointing year for Bank of Queensland Limited (ASX: BOQ), with the bank seeing its share price fall by 2% since the turn of the year. Indeed, this doesn't compare favourably to sector peer, Bendigo and Adelaide Bank Limited (ASX: BEN), which is up 3% over the same time period. Furthermore, Bank of Queensland has not been able to keep pace with the ASX, which is up 1.5% in 2014.
However, does this mean that Bank of Queensland is now the better buy, with shares having fallen to a more attractive level? Or is Bendigo and Adelaide the better prospect for investors going forward?
Valuations
Clearly, there remains a vast amount of potential in the Aussie banking sector. Indeed, both banks trade on the same P/E of 13.3, which is well below the ASX's P/E of 16.2. This highlights the potential for upward revisions to the two banks' ratings, which would clearly be good news for shareholders.
However, while on the topic of valuation, Bendigo and Adelaide could offer the most attractive opportunity since it trades on a price to book ratio of 1.2. This is less than that of Bank of Queensland, which has a price to book ratio of 1.4. This shows that, while shares in both banks are keenly priced, Bendigo and Adelaide appears to offer slightly better value than its peer.
Looking ahead
Where Bank of Queensland shines versus its rival, though, is with regard to its growth prospects. Indeed, Bank of Queensland is forecast to increase its bottom line in the year to August 2015 by an impressive 10.2%. This is ahead of the wider market and also beats the growth forecast of Bendigo and Adelaide, which is all set to grow earnings by 6.9% in the year to June 2015. Although both growth rates are attractive, especially for the banking sector, Bank of Queensland appears to have the most potential in this key area.
Income potential
It's nip and tuck when it comes to yield, with both banks offering fat, fully franked yields. While Bendigo and Adelaide yields 5.1%, Bank of Queensland again pips its peer on 5.2%. Although it's close on this metric, as well as on valuations (where Bendigo and Adelaide has a lower price to book ratio than its peer), Bank of Queensland's stronger growth prospects over the next year could mean that it performs better than its sector rival moving forward.
Certainly, both banks are attractive at current price levels, but with growth in the banking sector being a valuable asset, the market could reward Bank of Queensland to a greater extent over the medium term due to its higher growth prospects. As such, it appears to be the better buy.
