CBA shares dip as analysts take positives from Q1 result
Make us a preferred source
Make us a preferred source on Google
More news: Shares in Commonwealth Bank lowered in morning trade on the ASX after the big four lender reported a first-quarter result that largely met market expectations.
CBA shares were down 1.6% to $147.87 by 11:40am AEDT, having advanced around 45% over the last 12 months. The financial sector (1.84%) was the worst performing while the wider ASX 200 was down 1.28%.
UBS analysts said CBA's trading update showed "a number of positive trends", most notably around an improving revenue outlook and strong franchise momentum across its consumer and business banking divisions.
Morningstar equity analyst Nathan Zaia said CBA's update was "largely as expected". Morningstar maintained its fair value estimate of $95 for CBA, though Zaia flagged that the company's shares are "materially overvalued".
What they said: "Like its major bank peers, Commonwealth Bank is seeing net interest margin stabilization, low-single-digit operating expense growth, mortgage arrears flatlining, and low loan losses," Zaia said.
"We forecast average earnings growth of 6% per year over the next five years.
"Supported by higher-than-average loan loss provisioning levels, and surplus capital, the bank is well-placed to preserve its legacy of reliable dividend growth."
CBA reports flat first-quarter profit
The news: Commonwealth Bank reported flat year-on-year profit for the first quarter, as the banking group flagged the continued impact of cost-of-living pressure on economic growth.
The numbers: CBA reported unaudited cash NPAT of $2.5 billion in the first quarter, flat compared to the prior corresponding quarter, but up 5% on the average profit over the two previous quarters.
Operating income grew 3.5% driven by one additional day in the quarter, profitable volume growth across core lending and deposit products, and timing of dividends received from minority investments.
Operating expenses climbed 3% due to lifted by wage inflation, increased investment spend and one additional day in the quarter.
The context: CBA chief executive Matt Comyn noted that inflation is moderating "but at a slowing pace", while global geopolitical tensions are creating uncertainty.
Growth in the Australian economy remains slow, he said, as higher rates continue to weigh on consumer demand and bring inflation back to the target range.
What they said: "We remain optimistic on the overall outlook and the Australian economy remains fundamentally sound," said Comyn.
"We remain focused on supporting our customers, investing for the future, generating sustainable returns for our shareholders, and providing strength and stability for the broader economy to achieve a brighter future for all."
The sources: ASX announcement, Morningstar research, UBS research
