CBA share price: revisiting the fundamentals before H1 earnings

We examine some the Commonwealth Bank of Australia’s key fundamentals before the bank reports its half-year results this week.

The Commonwealth Bank of Australia (ASX: CBA) represents both Australia’s largest bank and its best performing over the last year.

CBA share price: Q1 results revisited

Since the biggest of the big four reported its Q1 FY20 results on 12 November, the CBA share price has trended up.

Over the last year it’s done even better, rising ~14% in that period. By today's afternoon session the CBA share price traded around the $84.32 mark.

Around these price levels, CBA trades at a lofty valuation, especially when compared to other members of the big four.

Specifically, and according to recent research from Morgan Stanley, CBA is currently trading at ~17.2x forward earnings. By comparison, ANZ currently trades at ~12.2x forward earnings, NAB ~12.5x and WBC ~13.6x.

Maybe explaining this valuation discrepancy, CBA’s latest quarterly release indeed looks to have excited investors, with the bank reporting consistent volume growth, an increase in earnings and a good CET1 ratio.

Specifically, as part of its Q1 results, the bank noted that home lending rose 3.5%, household deposits had increased 10.4% and business lending (BPB) was up 2.8% – on a quarter-over-quarter basis.

Surprisingly even, when considering the current low rate environment, CBA's net interest income came in 3% high during Q1, attributable to lower basis risk and the aforementioned volume growth.

Non-interest income also rose in Q1 – up 7%.

The bank also posted stronger unaudited cash net profits of ~$2.3 billion in Q1 (from continuing operations), representing a 5% increase, when factoring in the exclusion of notable items.

The bank also remained above APRA's unquestionably strong threshold during the quarter, touting a CET1 ratio of 10.6%.

Do you own CBA shares? You can hedge your downside risk by trading CFDs now.

Will CBA beat or miss current expectations?

Looking back at the research commentary from Citibank and UBS following CBA’s Q1 results, we previously wrote:

‘Citibank pointed out that it expected the bank’s net interest margin (NIM) to be broadly flat in the second quarter of FY20, even though margins were stronger in the quarter just passed.’

Moreover, UBS, though impressed by CBA’s Q1 NPAT performance, ‘also noted that caution should be taken by investors, pointing out that Q1 is typically seasonally strong for the Commonwealth Bank of Australia.’

Such thoughts look to be well reflected in the current analyst consensus, with CBA currently carrying 10 sell recommendations, five hold recommendations and zero buy recommendations, according to Bloomberg.

An average 12-month price target of $75.30 per share (according to Bloomberg) may also suggest some downside for investors at current price levels.

Practise trading Australian stocks with an IG demo account now.

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

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


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.