Citi: Growth 'possible' for Bank of Queensland shares

Opinions are still mixed, however.

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Bank of Queensland Ltd (ASX: BOQ) shares have underperformed the overall market in 2024 and are up less than 1% this year.

What's more, the broader S&P/ASX 200 Banks Index (ASX: XBK) has surged more than 23% since trading resumed in January – an even wider performance gap.

Sentiment is currently mixed on Bank of Queensland shares, with brokers sat on both sides of the fence.

Let's dive in and see.

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Growth 'possible' for Bank of Queensland shares?

Bank of Queensland shares are on investor radars as the company prepares to release its full-year earnings this week.

And from what it seems, expectations aren't high.

According to The Australian, Citi analysts project the bank to report a profit of $333 million this year.

Should this be the case, it would mark a 25% drop from last year's earnings.

However, despite the grim outlook, the broker says profit growth "should be possible" for the Bank of Queensland once industry-specific challenges are ironed out.

These include "flattening" net interest margins (NIMs) and more competitive deposit pricing, factors that hammered the bank's share price in recent times.

That being said, Citi also said the "depth business restructuring," along with spending on compliance could keep this growth "elusive".

The broker also didn't provide a timeline on when this growth should be expected.

No buy ratings just yet

Meanwhile, according to CommSec data, the consensus of analyst estimates has a sell rating on Bank of Queensland shares.

As my colleague James reported last week, fellow broker Goldman Sachs forecasts a 28% cut in the bank's profits for the year.

This is due to declining NIMs and higher operating costs, among other factors.

It has a sell rating on the Bank and a price target of $5.54 apiece. At the time of writing, this represents more than 9% downside potential.

Brokers also expect the bank's dividend to be impacted by its lower earnings.

According to CommSec, consensus estimates project a total payment of 34 cents per share this year, down 17% from last year's total.

Consensus then expects the dividend payout to increase to 36 cents per share next year.

In contrast, Goldman projects annual dividends of 30 cents and 33 cents per share in the next two years, respectively.

According to my colleague Seb, ASX banks also currently trade at premium valuations, especially when compared to the overall quality of their underlying businesses.

Time will tell what this means for Bank of Queensland shares.

Foolish takeaway

Bank of Queensland shares have underperformed in 2024. Plus, analysts expect a soft set of earnings from the bank in its upcoming FY24 results.

In the last 12 months, the stock is up 12%.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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