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CBA share price: what to expect heading into the FY21 results

We look at some of the most important things traders and investors should know before the bank reports its full-year FY21 earnings next week.

CBA share price: what to expect heading into the FY21 results Source: Bloomberg

The Commonwealth Bank of Australia (ASX: CBA) has continued to put up a strong performance in the last six months, with its stock up around 15% in that period.

CBA last traded a shade above the $100 per share mark – giving the biggest of the big four banks a market capitalisation of $179 billion.

At such a price comes elevated stakes. CBA has persistently traded at a significant premium to its Australian banking peers, drawing scepticism from market onlookers in the process.

While this is a topic that has seemingly been talked at to death – we discussed it pretty recently here – it bears remembering as we draw closer the bank’s full-year results.

Those results – which are set to be released next Wednesday, August 11 – will either put CBA’s valuation on shaky grounds or demonstrate why it is justified.

Recent results revisted

As part of its most recent quarterly release, CBA went a long way to justify its valuation. Here the bank revealed:

  • Unaudited quarterly cash profits of $2.4 billion, up 24%
  • That expenses had increased just 1%
  • Impressive Australian volume growth, with business lending 3.0x system, deposits 1.4x system and home lending 1.1x system.

Commenting broadly on those results, at the time CBA’s CEO – Matt Comyn – said:

'The Bank remains well placed to support our customers and the broader community as the economic recovery from COVID-19 continues.'

'We have made good progress on our strategic agenda and looking ahead, we will continue to focus on differentiating our proposition through reimagined products and services to build tomorrow's bank today for our customers,’ Mr Comyn added.

Analyst musings

Some analysts however are sceptical, at least in regards to the chance of seeing any kind of drastic share moves as part of the upcoming full-year results.

Macquarie said they saw limited upside from the sector as a whole this earnings season, noting that the ‘drivers appear well understood.’

The investment bank added that in the short-term and as a result of the current macro environment in Australia (the re-emergence of Covid-19, for example), there is ‘risk to the sector’s performance, albeit recognise relative valuation support and longer-term upside if inflation concerns remerge.'

Macquarie also specifically called out CBA, saying they saw risk to its valuation premium.

By comparison, analysts from Citi provided more granular insights into how they expected CBA’s FY21 results to play out.

Some of their key expectations include:

  • Revenue growth is expected to rise 2.6% year-on-year off the back of ‘growing loan volumes, with cost growth.’
  • Full-year NPAT is expected to come in at $8,702 million, ahead of consensus estimates of $8,585 million.
  • A final dividend of $1.95 per share is forecast, equivalent to a 73% payout ratio.
  • The investment bank expects CBA to announce a ‘$5bn off-market buyback to be completed in 1Q22’.
  • The investment bank has a Neutral rating and $96.75 price target on CBA, suggesting that Citi believes the stock is moderately overvalued at current price levels

Do you have a view on CBA? Whatever you think, you can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) a stock using CFDs, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter <company name> in the search bar and select it
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Alternatively, you can invest in shares directly through our share trading service.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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