CBA share price: what to expect heading into the FY21 results

The Commonwealth Bank of Australia (ASX: CBA) has continued to put up a strong performance in the last six months, with its stock up around 15% in that period.

CBA last traded a shade above the $100 per share mark – giving the biggest of the big four banks a market capitalisation of $179 billion.

At such a price comes elevated stakes. CBA has persistently traded at a significant premium to its Australian banking peers, drawing scepticism from market onlookers in the process.

While this is a topic that has seemingly been talked at to death – we discussed it pretty recently here – it bears remembering as we draw closer the bank’s full-year results.

Those results – which are set to be released next Wednesday, August 11 – will either put CBA’s valuation on shaky grounds or demonstrate why it is justified.

Recent results revisted

As part of its most recent quarterly release, CBA went a long way to justify its valuation. Here the bank revealed:

• Unaudited quarterly cash profits of $2.4 billion, up 24%
• That expenses had increased just 1%
• Impressive Australian volume growth, with business lending 3.0x system, deposits 1.4x system and home lending 1.1x system.

Commenting broadly on those results, at the time CBA’s CEO – Matt Comyn – said:

'The Bank remains well placed to support our customers and the broader community as the economic recovery from COVID-19 continues.'

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

Analyst musings

Some analysts however are sceptical, at least in regards to the chance of seeing any kind of drastic share moves as part of the upcoming full-year results.

Macquarie said they saw limited upside from the sector as a whole this earnings season, noting that the ‘drivers appear well understood.’

The investment bank added that in the short-term and as a result of the current macro environment in Australia (the re-emergence of Covid-19, for example), there is ‘risk to the sector’s performance, albeit recognise relative valuation support and longer-term upside if inflation concerns remerge.'

Macquarie also specifically called out CBA, saying they saw risk to its valuation premium.

By comparison, analysts from Citi provided more granular insights into how they expected CBA’s FY21 results to play out.

Some of their key expectations include:

• Revenue growth is expected to rise 2.6% year-on-year off the back of ‘growing loan volumes, with cost growth.’
• Full-year NPAT is expected to come in at $8,702 million, ahead of consensus estimates of $8,585 million.
• A final dividend of $1.95 per share is forecast, equivalent to a 73% payout ratio.
• The investment bank expects CBA to announce a ‘$5bn off-market buyback to be completed in 1Q22’.
• The investment bank has a Neutral rating and $96.75 price target on CBA, suggesting that Citi believes the stock is moderately overvalued at current price levels

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