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FY 2021 results preview: Is the CBA (ASX:CBA) share price good value?

All eyes will be on the Commonwealth Bank of Australia (ASX: CBA) share price this time next week. On that…
The post FY 2021 results preview: Is the CBA (ASX:CBA) share price good value? appeared first on The Motley Fool Australia. –

All eyes will be on the Commonwealth Bank of Australia (ASX: CBA) share price this time next week.

On that day Australia’s largest bank will be releasing its highly anticipated full year results.

What is the market expecting from CBA in FY 2021?

According to a note out of Goldman Sachs, for the 12 months ended 30 June, the broker expects:

Operating revenue growth of 1.9% to $24,217 million
Net interest income growth of 1.7% to $18,922 million
Cash earnings from continuing operations up 15% to $8,342 million
A final fully franked dividend of $1.95 per share
A $3.5 billion or $2.00 per share special dividend.

What did the broker say?

As you can see above, while its estimates are actually a touch short of the market consensus, Goldman is confident that Commonwealth Bank will deliver a strong result for FY 2021.

It also expects the bank to finish the period in a very strong position, leaving it with significant surplus capital.

Goldman commented: “We highlight that given CBA sits on an implied surplus equivalent to 6.3% of its market capitalisation, combined with the fact that two of its peers (ANZ and NAB) have already announced on-market buy-backs, we forecast a special dividend of c.A$3.5 bn, equivalent to A200¢/share (may alternatively take the form of a structured off-market buyback). However, in light of the recent Covid-19 lockdowns and potential impact on the economy, we note there may be some risk to both the timing and magnitude of capital management.”

The broker has also suggested that investors keep an eye on its costs. It notes that the other major banks are committed to lowering their cost bases, but CBA has not provided an explicit target around its cost base. In fact, its costs have been increasing as it invests in its future growth.

Its analysts said: “We note that at the 1H21 result, management stated if the opportunity presents itself, CBA will reinvest to grow future revenues. At the 3Q21 update, underlying expenses increased 1% reflecting increased investment spend along with higher volume related costs. We will be paying close attention to commentary around how CBA is tracking on this front, particularly around investment spend, and for any changes in outlook/approach.”

Is the CBA share price in the buy zone?

Goldman Sachs continues to believe the CBA share price is expensive and that better value can be found elsewhere in the sector.

Its analysts have retained their sell rating and $81.87 price target on its shares. Based on the current CBA share price of $102.80, this implies potential downside of 20% over the next 12 months.

The post FY 2021 results preview: Is the CBA (ASX:CBA) share price good value? appeared first on The Motley Fool Australia.

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More reading

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Leading broker slaps $89 target on CBA (ASX:CBA) share price
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ASX 200 Weekly Wrap: ASX grinds to a halt following new all-time high

Motley Fool contributor James Mickleboro has no position 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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