CBA share price: Why the bank just hit a 52-week high

We examine the highlights of the bank’s third quarter trading update.

  • The CBA share price hit a 52-week off the back of its Q3
  • The bank reported good lending and earnings growth
  • JP Morgan raised their rating on the bank following the Q3
  • You can trade bank stocks with IG now. Create an account here.

The Commonwealth Bank of Australia (ticker: CBA) share price rose, if just slighlty, following the release of its Q3 trading update on Thursday, 13 May.

It proved to be another strong quarter for the bank, with CBA reporting solid growth across its core loan book as well as robust cash NPAT growth.

The stock finished out yesterday’s session just up in response, closing at $95.98 per share – marking a 52-week high for the company.

The CBA share price continued to rise on Friday, opening at $97.25 per share. Around those price levels, the stock is up approximately 30% over the last six months, as investors have turned bullish on Australia’s banking sector.

Q3 Results at a Glance

Profits: From an earnings perspective, for the quarter ending March 31, CBA reported unaudited statutory profits (NPAT) of approximately $2.4 billion.

Cash NPAT was the same, coming in at approximately $2.4 billion, implying an increase of 24% from the first-half quarterly average. Management noted that this performance was driven primarily by lower loan impairment expenses as well as a strong operational performance.

Costs: On an ex-remediation basis, expenses were up 1% in the quarter. Including remediation costs, they were up 2%.

Like many other Australian banks, lower impairment charges boosted earnings, as improving economic conditions has ‘resulted in a reduction in collective provisioning levels.’

In saying that, the bank remains cautious, saying:

‘Nevertheless, provision coverage remains strong and continues to reflect a cautious approach to managing risks as the economic recovery from COVID-19 continues.'

Loans: Seemingly a hallmark of CBA’s results, the retail-focused bank posted yet another quarter of strong lending growth. On a year-on-year basis business lending was up 8.1%, household deposits gained 13.9% and home lending was up 5.3%.

At the close of the quarter, CBA’s capital ratio (CET1) stood at 12.7%, firmly above the regulatory threshold.

Commenting on where the bank is heading next, Commonwealth’s CEO, Matt Comyn said:

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

No commentary around CBA’s final dividend was provided.

Is the CBA share price expensive?

Valuation: Many have argued – relative to its peers, both global and local – that the CBA share price is expensive. To be sure, the bank trades on a steeper earnings multiple than its local counterparts, roughly at 21x trailing earnings, according to Yahoo Finance.

Analysts from JP Morgan are keenly aware of that fact, but note that a catalyst behind a derating remains unclear. Here, the investment bank said:

'CBA has invested continuously and effectively in its business, which has seen it grow revenue faster than peers.'

'We think CBA's business is the envy of its peers with its strong scale and technology advantages.'

JP analysts raised their rating on the biggest of the big four from Underweight to Neutral in the wake of the Q3.

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.

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.