Following on from our early note on US regional banks we have looked at Australian regional BOQ which has already fallen -15% this financial year and at the moment shows no sign of arresting its decline. In a similar fashion to the US sector both BOQ and Bendigo (BEN) have struggled compared to their local peers with major operational issues such as mortgage competition having already negatively impacted BOQ’s margins while rising deposit competition and higher wholesale funding costs creating additional headwinds– we see these issues continuing hence the valuation elastic band needs to stretch further before we consider the likes of BOQ.
- We see further downside risks for BOQ despite the valuation being close to extreme multiples but it is starting to represent value into its current decline – we believe it’s too early to catch this falling knife.
MM may consider BOQ under $5
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