CBA share price: 3 things to consider before FY20 results

We look at when the Commonwealth Bank is set to report its FY20 results, how analysts currently rate the stock, and the dividend outlook.

When will the bank report its FY20 results

The Commonwealth Bank of Australia (CBA) is set to report its full-year (FY20) results next Wednesday, 12 August. The bank is also set to reveal details of its final dividend on that date.

CBA share price: the analyst view

Unsurprisingly, the sell-side has become increasingly pessimistic on Australia’s largest bank over the last month, assigning the stock an Underweight rating on average, according to the Wall Street Journal. This comes as the entire sector faces a myriad of headwinds, including historically low interest rates, dividend restrictions imposed by the Australian Prudential Regulation Authority (APRA) and significant loan loss provisions stemming from the coronavirus pandemic.

From a price perspective, the average analyst price target on CBA currently sits at $66.71 per share – suggesting further downside potential from current price levels, also according to the Wall Street Journal.

Will CBA pay a final dividend?

With many investors historically buying the banks for their yield, investors – prospective or current – are likely eager to see whether the bank will pay a final dividend, and if so, how much it will be.

In March, CBA – buoyed by its strong capital position – paid out a $3.5 billion dividend, representing a payout of $2.00 per share.

This decision from the bank has itself created a ‘problem’ in light of APRA’s recent regulatory guidance which stated that authorised deposit taking institution’s payout ratios should not exceed 50% of earnings.

Elucidating that issue and as Citi put it:

‘The question for interpretation here remains the impact of the interim dividends paid out by CBA and BEN. These were paid in CY20, but on earnings that were generated in the 2019 calendar year. Dividends declared in February 2020 would leave BEN and CBA largely at their 50% cap for the rest of the year.’

Overall, Citi analysts recently noted that consensus dividend expectations remain volatile – with analysts’ expectations of Commonwealth’s Final dividend ranging from between 20-120 cents per share. For reference, the investment bank expects CBA to pay a final dividend of 50 cents per share – bringing the bank’s full-year dividend to 250 cents per share – representing a 48% payout ratio, a shade under APRA’s regulatory guidance. By FY22, Citi analysts see the potential of bank dividend payout ratios across the board returning to around 75%.

The waiting game

With share prices lagging across the sector and dividends facing regulatory scrutiny, yield hungry investors are likely keen to see things ‘normalise’. According to Morgan Stanley, while dividends across the sector are set to remain soft in 2020, they are set to return to higher levels in 2021.

‘Based on our forecasts, the average yield is ~3.2% for this year and ~5.5% for next year,’ Morgan Stanley analysts said in a note.

CBA closed Tuesday's session at $71.50, up over 30% from the lows it recorded in March.

How to trade bank stocks, long or short

Where do you stand heading into CBA’s FY20 results: are you bullish or bearish on the banks? Whatever your view, 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) CBA using CFDs, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘CBA’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.