How you can value the BOQ share price

Core Viewpoint - The Bank of Queensland Limited (BOQ) is facing challenges in its share price valuation amidst current market volatility, with key metrics indicating lower performance compared to sector averages. Group 1: Company Overview - BOQ is one of Australia's largest regional banks, operating nearly 200 branches, many of which are managed by owner-managers, effectively making them small business owners [2] - The majority of BOQ's loans are comprised of mortgages, which is a critical aspect of its lending strategy [2] Group 2: Financial Metrics - BOQ's net interest margin (NIM) is 1.56%, which is below the ASX major bank average of 1.78%, indicating a lower return from lending compared to peers [6] - The bank earned 93% of its total income from lending last year, highlighting the importance of NIM in assessing profitability [7] - Return on equity (ROE) for BOQ was 4.7%, significantly lower than the sector average of 9.35%, suggesting less efficient use of shareholder equity [8] - The common equity tier one (CET1) ratio for BOQ was 10.7%, which is also below the sector average, indicating a weaker capital buffer [9] Group 3: Dividend and Valuation - The total dividend for BOQ last year was $0.34, with projections suggesting a growth rate between 2% and 4% [11] - Using a dividend discount model (DDM), the estimated average valuation of BOQ shares is $7.19, with an adjusted valuation based on forecast dividends rising to $7.40 [12] - The fair value calculation, considering fully franked dividends, suggests a potential valuation of $10.57, indicating that the current share price of $7.08 may appear expensive [12][13]