What to expect from the Commonwealth Bank (ASX:CBA) half year result

The Commonwealth Bank of Australia (ASX:CBA) share price will be on watch next week when it releases its half year results. Here’s what to expect…
The post What to expect from the Commonwealth Bank (ASX:CBA) half year result appeared first on The Motley Fool Australia. –

CBA branch welcome sign

Earnings season will be heating up next week with the release of results from some of Australia’s biggest companies.

Chief among them will be the half year results release of Commonwealth Bank of Australia (ASX: CBA) on Wednesday.

Ahead of the release, I thought I would take a look to see what the market is expecting from Australia’s largest bank.

What is expected from Commonwealth Bank in the first half?

According to a note out of Goldman Sachs, it is expecting the bank to report cash earnings from continuing operations (pre-one offs) of $3,692 million. This will be down 15% on the prior corresponding period.

It is also notably lower than the market consensus cash earnings estimate of $3,954 million.

Goldman is also forecasting a dividend that is well short of consensus estimates. It has pencilled in an interim dividend of $1.25 per share, compared to the market’s expectation for a $1.45 per share dividend.

Both will be down from the $2.00 per share dividend it paid to shareholders in the prior corresponding period.

What else should you look out for?

The broker is expecting Commonwealth Bank to report a 4 basis point half on half decline in its net interest margin (NIM). This is expected to be driven by the impact of lower cash rates, mortgage competition, and its asset mix.

Though, Goldman does see potential for upside risk to its NIM forecast in the short term given recent and relatively aggressive downward repricing of deposit rates.

Its analysts are also expecting the bank to report a normalisation in its bad debts, which could ultimately lead to a reversal in some of the provisions it has made.

It explained: “To date, CBA’s performance on loan deferrals looks promising with the most recent data point showing another improvement (in Dec-20, deferrals sat at c.2% of total loans, down from its May-20 10% peak). We forecast BDD/TLs to fall to 30bp (from 54bp in 2H20) and see scope for potential provision releases; a key focal point of ours in the upcoming result being any indications made around this timing.”

Is the Commonwealth Bank share price a buy?

Given that Goldman Sachs is forecasting much weaker earnings and dividends than the market consensus, it may not come as a surprise to learn that the broker isn’t buying its shares right now.

The broker currently has a sell rating and $65.49 price target on its shares. This compares to the latest Commonwealth Bank share price of $87.06.

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Motley Fool contributor James Mickleboro 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.

The post What to expect from the Commonwealth Bank (ASX:CBA) half year result appeared first on The Motley Fool Australia.

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