Bank of Queensland Ltd (ASX: BOQ) shares have seen a lot of volatility this year, as shown on the chart below. There are a few things that investors need to consider about the ASX bank share and the broader sector, we're going to look at what experts think of the business.

BOQ shares have only gone up by 10% this year, while the major banks have done much better. In 2024 to date, the Commonwealth Bank of Australia (ASX: CBA) share price has gone up 37%, the National Australia Bank Ltd (ASX: NAB) share price has risen 20%, and the Westpac Banking Corp (ASX: WBC) share price has climbed 39%.

Past performance is not a reliable indicator of future performance, so let's look at what could happen.

Expert commentary on the ASX bank share

Creditorwatch recently released a report, which included some commentary that high asset prices could support bank profits. That's because a high house price minimises the likelihood of a bad debt for a bank like BOQ if the property must be sold to repay the mortgage that the bank provided. This dynamic of high house prices could be supportive for Bank of Queensland shares.

Creditorwatch stated:

Elevated and/or rising asset prices are likely an important explanation of this conundrum, with the household sector in aggregate having deleveraged significantly in recent years as house and share prices have risen sharply.

And for many of the still relatively low share of households getting into financial difficulty, the 20-40% rise in house prices since before COVID generally means that the asset can be sold often at a profit and almost always without a significant impact on bank losses.

This is not to say that many are not doing it tough – indeed we hear frequently of significant increases in demand for food support services.

However, the data so far suggests that these pressures are not showing up in significantly increased pressures or losses for financial institutions. Where there is some greater pressure reported is on newer non-bank lenders.

I think it may be helpful that BOQ has useful exposure to the Queensland loan market and, therefore, Queensland property, which is performing better than Melbourne and Sydney.

Turning to the broker UBS' views, it points out that BOQ is seeing deteriorating asset (loan) quality metrics, though rate cuts could help.

UBS also believes that BOQ management is "proactively addressing elements of the bank's underperformance", including its costs, net interest margin (NIM), and retail profitability. The broker notes that BOQ is also looking to simplify the group's structure and "reset the economics around their franchise model".

The broker pointed out that BOQ's retail bank profitability has fallen, so it could benefit by pivoting and allocating more resources to higher-returning segments such as specialist asset finance and business banking to help drive a higher return on equity (ROE).

Financial predictions for Bank of Queensland shares

UBS has made a number of FY25 financial predictions for Bank of Queensland shares.

The broker predicts that BOQ could generate $1.69 billion in revenue, $363 million in cash earnings after tax, and $317 million in statutory net profit after tax (NPAT).

UBS has a price target of $5.75 on the BOQ shares, which implies that the broker thinks the stock could decline more than 14% over the next year.

But, the broker suggested that BOQ could positively surprise if it makes more progress on its simplification and achieves a better-than-expected net interest margin (NIM). However, worse-than-expected costs could create a negative surprise.