CBA results preview: key perspectives to consider before the Q3

With the Commonwealth Bank of Australia (CBA) set to release its third quarter results tomorrow, we examine how market sentiment around the bank has shifted in the last few months.

Analysts soften their views

Analyst sentiment around CBA has turned somewhat more optimistic in the last month, as equity markets trend bullishly.

According to the Wall Street Journal (WSJ), CBA currently has four Buy ratings, two Overweight ratings, three Hold ratings, and Six Sell ratings. The bank's overall analyst consensus rating is a Hold.

Compared to just one month prior, CBA had no Buy or Overweight ratings, five Hold ratings, one Underweight rating and nine Sell ratings, also according to WSJ. At the time, CBA’s overall analyst consensus was Underweight.

Investors will likely be closely watching to see if the analyst consensus changes again – bullishly or bearishly – in the wake of CBA’s third quarter results release.

Investors harden their view

Though the analyst outlook may have softened on CBA in recent months, the bank’s share price has lagged the ASX 200 benchmark since equity markets bottomed-out in March.

At the height of the coronavirus-led market sell-off, CBA hit a low of just $53.25 per share, on 23 March. Though the bank has recovered since then, finishing Monday’s session at $60.14 per share – the biggest of the big four remains well off its 52-week high of $91.05 per share.

The retail-focused bank has also recovered less than the broader market in percentage terms, with the ASX 200 climbing close to 20% since its March lows.

CBA technical analysis

Looking at CBA from a technical perspective, IG Market Analyst Kyle Rodda said:

‘The technical set-up for CBA’s share price remains bearish overall, despite the fact it remains still some way from its March lows. Momentum remains clearly skewed to the downside, with the share’s key moving averages pointed lower. The shorter-term 20-day moving average has proven a key area of technical resistance itself. The RSI remains below 50, which also speak of the lack of upside momentum for CBA shares.'

Mr Rodda finished by saying:

'Crucially now, the price action has formed a bearish-pennant pattern, which portends a continuation of the broader downtrend for the stock price. If this pattern day’s follows its text-book course, the next key levels to watch for CBA’s share price will be support at $56.70 and the March low of $53.25.’

Other bits and pieces

Finally, as part of CBA’s Q3 results, investors will likely be closely watching the bank’s performance as it relates to:

• Credit impairment charges and allowances for expected credit losses
• Third quarter cash profits and CBA’s CET1 ratio
• Any commentary around the bank’s dividend policy in the wake of the coronavirus pandemic

In a recent research note, Morgan Stanley analysts said that while they expect CBA to book lower profits and higher provisions as part of the Q3, this outcome is 'unlikely to surprise investors in the current environment, we think the trading update will lead to less confidence in the capital and dividend outlook, and make CBA's premium trading multiples harder to justify.’

How to trade on the CBA share price – long or short

Where do you stand in the lead up to Commonwealth’s Q3: are you bullish or bearish on the retail-focused bank? Whatever your view, you can use CFDs to trade the likes of CBA and the other big four banks – long or short through IG’s world-class trading platform now.

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

• Create an IG trading account or log in to your existing account
• Enter ‘CBA’ in the search bar and select it
• Choose your position size
• Click on ‘buy’ or ‘sell’ in the deal ticket
• Confirm the trade