Were the predictions of analysts on the money?
Commonwealth Bank has announced its half-year earnings today, following predictions of a healthy yet smaller profit than last year.
It announced a half-year profit of $3.9 billion, a 10.8% drop on the previous year, with shareholders to receive an interim dividend of $1.50 - up from 98c in the June half, but down from $2 this time last year.
“Australia is relatively well positioned having started from a position of fiscal and economic strength,” chief executive Matt Comyn told The Sydney Morning Herald. “We have a solid pipeline of infrastructure projects, the outlook for mining and agriculture is strong, and the community has benefited from the government’s significant income support measures.”
In the mortgage market, the bank grew at 1.5 times market average with an additional $13 billion of loans added during the half. Expenses for impaired loans were lower than the $1.9 billion recorded in the June half, at $882 million, but this was still higher than the amount posted the previous year, reported The Sydney Morning Herald.
Here are the results analysts were predicting.
Morgan Stanley analyst Richard Wiles projected CBA to post first-half cash profit of $4.1 billion, a 40% spike on the prior half, and pre-provision profit of $6.64 billion.
“We expect positive commentary on franchise performance, an emphasis on balance sheet strength, a conservative approach to capital management and provisioning, and no full-year earnings guidance,” Wiles said in a client note. He predicted that revenue would be down about 0.5% year over year, but up 2% half over half, to $11.95 billion.
“CBA’s solid mortgage growth is well appreciated, so we think underlying margin trends, business loan growth and the composition of other banking income will be the key drivers of upgrades/downgrades to fiscal 2021 revenue estimates,” he said.
Morgan Stanley predicted that CBA would announce a dividend of $1.55 per share, but said it didn’t support a share buyback.
“More importantly, we believe CBA should consider using its surplus capital to support a higher medium-term payout ratio rather than undertaking buybacks,” Wiles said.
Goldman Sachs analysts predicted that CBA’s payout ratios would rise, with upside risk on the pace of its acceleration, The Australian reported.
“We have CBA’s payout ratio steadily moving back towards our assessment of sustainable levels (around 75 per cent) by fiscal 2022,” Goldman Sachs told clients. “However, with significant surplus capital and franking credits, we concede CBA may accelerate this move through the course of fiscal 2021, placing upside risk to our 60 per cent first-half payout ratio forecast.”
Goldman Sachs said it was too early in the cycle to see further capital management announcements.
Brendan Sproules, banking analyst for Citi, predicted cash earnings of $4 billion and a bad and doubtful debt expense of 22 basis points in the second quarter. That’s compared to consensus estimates of 28 basis points.
Sproules predicted a higher-than-consensus dividend of $1.65 per share on expectations that the bank will beat estimates on its bad and doubtful debts.
Ord Minnett analysts told clients that, along with updates on margins and capital management initiatives, they will look for commentary on the outlook for CBA’s loan deferral book and an update on its strategic review, including outstanding divestments, The Australian reported.
Ord Minnett predicted a cash net profit of $3.9 billion, a net interest margin of 1.99%, and a dividend of $1.50 per share.