Bank of Queensland Limited (ASX: BOQ) shares will be on watch this week.
On Wednesday the regional bank is scheduled to release its full year results for FY 2021.
Ahead of the release, I thought I would look to see what is expected from the bank.
What is expected from Bank of Queensland in FY 2021?
According to a note out of Goldman Sachs, its analysts are expecting Bank of Queensland to deliver strong profit growth in FY 2021.
The note reveals that the broker has pencilled in cash earnings of $406 million, which will be an increase of 80% year on year.
This is expected to lead to cash earnings per share of 66 cents, allowing the bank to pay a 39 cents per share fully franked full year dividend. The latter comprises an interim 17 cents per share dividend and Goldman's forecast for a 22 cents per share final dividend.
Based on the current Bank of Queensland share price of $9.72, this represents an attractive 4% dividend yield.
What else should you out for?
There are a number of key metrics that banks release with their results that help investors judge its performance and the strength of its business.
One of these is its CET1 capital ratio, which Goldman expects to come in at 10%. This is ahead of the bank's target range of 9% and 9.5%, suggesting there's room for potential capital returns.
In addition, the broker is expecting a notable improvement in the bank's cash return on equity from 5.4% in FY 2020 to 8% in FY 2021.
Another metric Goldman will be looking out for is its lending growth. It expects the bank to be growing its lending at above system growth.
It explained: "For 2H21, BOQ expected to achieve above system lending growth with a steady recovery in business lending through 2H21. (GSe housing +2.8% vs. system (ex-ME Bank), business -1%). We will be keen to hear management commentary around the sustainability of its volumes growth and whether this can be achieved with a reasonable NIM outcome. We note that the recent month's APRA data indicates 4 straight months of improved momentum (tracking at 13.3% on a 3m ann. basis) and we remind investors that at its 1H21 result, BOQ guided to 2H21 NIM (ex-ME Bank) to be flat hoh."
Are Bank of Queensland shares in the buy zone?
The note reveals that Goldman Sachs still sees value in Bank of Queensland shares at the current level.
The broker currently has a buy rating and $10.09 price target on its shares.
Based on the current Bank of Queensland share price, this implies a potential return of 4% before dividends and 8% including them.
Though, it is worth remembering that this recommendation could change (for better or for worse) depending on the quality of its results on Wednesday.
