CBA chief executive Matt Comyn will provide an update to the market on the bank’s highly anticipated earnings results on Wednesday.Credit:Dominic Lorrimer
The consensus is for CBA to clock in a $5.1 billion cash net profit. The bank recorded a $5.15 billion profit for the previous corresponding half-year to the end of 2022,but JP Morgan lead Australian banks analyst Andrew Triggs said this time around there were several headwinds for the company.
“CBA has shown it is not immune to industry-wide cost pressures,” he said,which would probably weigh on the bank’s profit growth,with “competition remaining intense in the mortgage market,to which CBA is heavily exposed.”
While competition for home loans has been intense over the past few years,with banks offering cash backs and ultra-cheap fixed rate loans,CBA has been cautious to preserve its margins especially in the September quarter last year.
Despite this,Triggs said he expected CBA’s net interest margin,a measure of profitability comparing banks’ funding costs with what they charge for loans,to continue falling on the back of a pickup in mortgage growth in its second quarter.
‘We think the board will be wary of lifting the dividend when core earnings are falling.’
Citi head of Australian Banks Research Brendan Sproules
Overall,Triggs said he expected CBA’s net profit to come in at about $4.9 billion,below consensus,although he noted CBA was a leader in its deposits franchise,with a developing business bank which could help insulate its margins.
However,he said CBA’s shares were trading on multiples which were “impossible to justify” given its outlook on returns and modest growth potential.