{"id":128701,"date":"2022-08-07T14:17:23","date_gmt":"2022-08-07T14:17:23","guid":{"rendered":"https:\/\/fin2me.com\/?p=128701"},"modified":"2022-08-07T14:17:23","modified_gmt":"2022-08-07T14:17:23","slug":"framing-the-downside-all-eyes-on-cba-as-market-hones-in-on-outlook","status":"publish","type":"post","link":"https:\/\/fin2me.com\/markets\/framing-the-downside-all-eyes-on-cba-as-market-hones-in-on-outlook\/","title":{"rendered":"\u2018Framing the downside\u2019: All eyes on CBA as market hones in on outlook"},"content":{"rendered":"

Commonwealth Bank is poised to deliver exceptionally healthy full-year results this week, but analysts and investors warn the numbers will largely be \u201cin the rearview mirror\u201d, as they set their sights on the lender\u2019s forecasts for the year ahead.<\/p>\n

The country\u2019s largest bank will release its full-year results on Wednesday, amid a tightening monetary policy that has seen the Reserve Bank of Australia raise interest rates for four successive months. The big four banks have passed on all the RBA\u2019s rate rises to variable home loan customers, while the increase in deposit rates has been more limited.<\/p>\n

<\/p>\n

Commonwealth Bank will releases its full-year results on Wednesday. <\/span>Credit:<\/span>Peter Braig<\/cite><\/p>\n

Tribeca Investment Partners portfolio manager Jun Bei Liu said she was expecting to see good margin expansion, improvement across return on equity and reasonable credit growth from CBA. But she said she was more interested in the bank\u2019s commentary on its outlook.<\/p>\n

\u201cI think for the market, the issue is that all of these results are being pretty much in the rearview mirror,\u201d she said. \u201cIt\u2019s really about the commentary about how they see the credit growth and some of those things going forward, what they see in the underlying market at this point, rather than what the result is indicating. That\u2019s going to be very important.\u201d<\/p>\n

She said guidance on the net interest margin outlook would be key, and would likely drive the share price movement. Net interest margins compare funding costs with the rates at which banks lend. The next six to 12 months will see the full impact of interest rate rises, Liu said, given many fixed rate mortgages will roll off during this time.<\/p>\n

Liu said that CBA trades at a significant premium to the rest of the banks because it has outperformed the sector, and investors will need to see that momentum continuing.<\/p>\n

\u201cNow clearly, there\u2019s flight to quality. So for this business to maintain its premium, it\u2019s incredibly important for it to demonstrate leadership, [and that] it\u2019s above the system growth,\u201d she said. \u201cSo if they disappoint on some of those growth stats, the share price will come off quite meaningfully because it is at such a premium.\u201d<\/p>\n

Atlas Funds Management senior portfolio manager Hugh Dive said CBA\u2019s results were an important feature of the earnings season because of the detail the bank provides about the broader state of the Australian economy.<\/p>\n

Dive said he will be looking closely at CBA\u2019s net interest margin and the loan losses. He predicted there would not be much margin expansion, and less loan losses than others are predicting.<\/p>\n

\u201cHistorically, banks have done quite well in that rising rate environment, we\u2019ve seen a decade of headwinds from rates falling. We think that the loan losses will be less than many are forecasting,\u201d he said.<\/p>\n

\u201cThe previous cycles have been with much higher levels of unemployment and significant corporate collapses. High levels of employment will mitigate against bad debts at the levels seen in other tightening cycles, such as 1991 and 2008.\u201d<\/p>\n

Morgan Stanley equity analyst Richard Wiles said in a note that he expected a good second-half result for CBA and an \u201ceven better near-term earnings outlook\u201d, but flagged commentary on margin tailwinds, loan growth prospects and the economic outlook as key issues.<\/p>\n

Goldman Sachs analysts said they expected the market to focus on any updated commentary about the leverage of the banks net interest margins to cash rate rises. They expect CBA to pay a 205 cents per share fully franked final dividend.<\/p>\n

\u201cFor us, the key focus will be around how CBA frames its downside and severe scenarios as part of its expected credit losses modelling, which we suspect will need to shift from scenarios based around covid-lockdowns, to be more focused around stagflation,\u201d they said.<\/p>\n

JP Morgan analyst Andrew Triggs said, \u201call eyes are on the net interest margin outlook given rate hikes\u201d.<\/p>\n

He said they expect a mixed result from CBA, with strong loan growth and immaterial loan losses. He predicted a slight net interest margin decline in the second half, but an improved margin in the fourth quarter with the early benefits of rate rises.<\/p>\n

The main area of focus will be on net interest margin outlook commentary, he said, with CBA possibly giving more specific guidance on rate leverage. He said they would also be looking for any early signs of stress in the books from rising interest rates.<\/p>\n

In February, the bank beat expectations with 23 per cent growth in cash profit, unveiling a higher-than-expected dividend and announcing a $2 billion share buyback.<\/p>\n

Other major companies set to release their results this week include Suncorp on Monday, Telstra and Woodside Energy on Thursday, and IAG on Friday.<\/p>\n

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion.<\/i><\/b> Sign up to get it every weekday morning<\/i><\/b>.<\/i><\/b><\/p>\n

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Commonwealth Bank is poised to deliver exceptionally healthy full-year results this week, but analysts and investors warn the numbers will largely be \u201cin the rearview […]<\/p>\n","protected":false},"author":3,"featured_media":128700,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"yoast_head":"\n\u2018Framing the downside\u2019: All eyes on CBA as market hones in on outlook - Fin2me<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fin2me.com\/markets\/framing-the-downside-all-eyes-on-cba-as-market-hones-in-on-outlook\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"\u2018Framing the downside\u2019: All eyes on CBA as market hones in on outlook - Fin2me\" \/>\n<meta property=\"og:description\" content=\"Commonwealth Bank is poised to deliver exceptionally healthy full-year results this week, but analysts and investors warn the numbers will largely be \u201cin the rearview [...]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/fin2me.com\/markets\/framing-the-downside-all-eyes-on-cba-as-market-hones-in-on-outlook\/\" \/>\n<meta property=\"og:site_name\" content=\"Fin2me\" \/>\n<meta property=\"article:published_time\" content=\"2022-08-07T14:17:23+00:00\" \/>\n<meta name=\"author\" content=\"Mark\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:image\" content=\"https:\/\/fin2me.com\/wp-content\/uploads\/2022\/08\/\u2018Framing-the-downside-All-eyes-on-CBA-as-market-hones-in-on-outlook.jpg\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Mark\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/fin2me.com\/markets\/framing-the-downside-all-eyes-on-cba-as-market-hones-in-on-outlook\/\",\"url\":\"https:\/\/fin2me.com\/markets\/framing-the-downside-all-eyes-on-cba-as-market-hones-in-on-outlook\/\",\"name\":\"\u2018Framing the downside\u2019: All eyes on CBA as market hones in on outlook - 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