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Commonwealth Bank (ASX:CBA) – Australia’s second-largest stock by market cap after BHP Group (ASX:BHP) – has slightly beaten expectations for its half-year report – but only very softly.
The company posted profits of $5 billion; lower than Goldman Sachs’ estimates for a number closer to $5.1 billion; but above consensus estimates of a figure closer to $4.9 billion.
CBA’s profits have fallen three per cent compared to 1H FY23.
The bank has also called a dividend of $2.15/sh; lower than the consensus estimate of $2.23/sh but above Goldman Sachs’ more pessimistic $2.10/sh outlook.
The result is mixed, but, the effects of any downward activity in the CBA share price driven by a three per cent profit loss pcp is likely to be lost amidst the carnage of a hotter-than-expected US inflation print.
The US core inflation rate was revealed to be 3.9 per cent overnight; as soon as the news came out, S&P500 and NASDAQ futures immediately tanked.
ASX200 futures followed soon after. While CBA is Australia’s second-largest stock, it will be hard to seperate the signals today.
Unexplainable YTD surge
A recent largely unsubstantiated run in the CBA share price helped push the ASX200 to its fresh all time high earlier this year.
With 15 stockbrokers rating CBA a ‘Sell,’ it’s not really clear why, exactly, this is happening.
The brand is a household name – this is forever overlooked as a major indicator of stock performance – and it’s also perceived as stable (as well as patriotic).
Outflows from China are likely also a factor.
At close on Tuesday, one-year returns were up 6.26 per cent and shares sat at $116.00 pre-market today.
Over the last four weeks, around $130-$150 million of AUD has been traded in and out of CBA – clearly, the majority going in.
Sidebench highlights
Mortgage profitability was one of the key things Goldman Sachs were keen to see, and that situation is improving. Or, to be more accurate, mortgage losses are slowing.
Net interest margins (NIMs) are also on the agenda with that metric stalling after growing across the banking sector in the early COVID years.
NIMs have largely been why brokers were turned off banking stocks in the recent past, though, Westpac (ASX:WBC) and National Australia Bank (ASX:NAB) tend to receive warmer favour.
In short: CBA NIMs still not great, but, losses there were offset by higher fees.
All in all, CBA still appears strong, and the market could keep clinging to it.
But with that three per cent drop in profit pcp, maybe it’s enough to start making people pay attention to broker consensus. Maybe not.
