Insights

Why have investors been selling off Bank of Queensland (ASX:BOQ) shares lately?

Investors haven’t been chasing the bank’s shares lately.
The post Why have investors been selling off Bank of Queensland (ASX:BOQ) shares lately? appeared first on The Motley Fool Australia. –

The Bank of Queensland Ltd (ASX: BOQ) share price edged lower today to finish at $9.28, a 0.54% dip from the previous close.

In fact, Bank of Queensland shares have been sliding this past week, after kissing their 52-week closing high last Monday.

Why have Bank of Queensland shares slipped lately?

The Bank of Queensand share price has been on a one-way ticket south in the last week, having shaved 5% off its gains in that time.

It seems investors have been selling off Bank of Queensland shares following the release of the company’s FY21 results last week.

The regional bank recognised an 83% year on year increase in cash net profit to $412 million in FY21. It also increased its full year dividend by more than 200% from FY20 to 39 cents per share.

These results came in ahead of the consensus earnings figures published by analysts for its FY21 results.

However, this momentum wasn’t enough to deter investors from concentrating on the bank’s earnings outlook in FY22.

Management anticipates its net interest margin to contract by around 5-7 basis points next year as interest rates continue to be bottom heavy into the foreseeable future.

As such, it appears Bank of Queensland forecasts a step down in its FY22 earnings guidance which may have spooked the investing herd.

Why is this important? First and foremost, the market prices a company’s individual shares based on a combination of past earnings performance and future earnings expectations.

Investors will either bid up the price of a share or drive it down based on the mechanics of this relationship.

In Bank of Queensland’s case, when looking in the rearview mirror, everything seems fine. It’s looking at the road ahead that seems to make investors nervous.

Given the company expects a substantial decrease in its earnings grade for the upcoming financial year, it comes as no surprise that the market – being relatively efficient in its pricing mechanisms – was quick to factor this into the bank’s share price.

As such, it appears investors have been selling off Bank of Queensland shares on the back of its FY22 earnings guidance, in the absence of any other price sensitive information.

Bank of Queensland share price snapshot

Bank of Queensland shares have posted a 23.5% return since the beginning of this year, extending their run over the last 12 months to 39%.

This is ahead of the S&P/ASX 200 Index (ASX: XJO)’s return of around 19% in that time.

The post Why have investors been selling off Bank of Queensland (ASX:BOQ) shares lately? appeared first on The Motley Fool Australia.

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More reading

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Which ASX 300 shares are leading the way mid-week?

Why Bank of Queensland, Fortescue, Liontown, & Pact shares are dropping

ASX 200 (ASX:XJO) midday update: BOQ results, A2 Milk shares jump

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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 Bruce Jackson.

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