Commonwealth Bank share price: key things to watch for in full-year results

The Commonwealth Bank of Australia (CBA: ASX) share price has risen consistently in the last six months, following the resolution of the Hayne Royal Commission earlier in the year.

Yet as we near CBA’s full-year results – set to be announced on August 7 – investors will likely turn their focus to how the bank can maintain and grow its profits in the year ahead.

Here's the top four things you need to know before CBA announces its full-year results early next month.

The all-important dividend announcement

Income-focused investors will likely be keen to see concrete details of CBA's full-year dividend. The bank currently boasts a dividend yield of 5.19%.

Indeed, given the big four’s concentrated market share, very few have questioned CBA's ability to maintain the payment of this hefty dividend in the past.

Moreover, even with the sizable remediation costs stemming from the Royal Commission, there has been no indication that CBA will reduce its dividend any time soon.

Commonwealth Bank's loan book in focus

Given the volatility of Australia’s housing market in the last two years, the strength of CBA’s loan book will likely gain increased scrutiny during the bank's full-year results.

For example, in the third quarter, CBA noted that:

‘Consumer arrears were impacted by seasonal factors in the quarter and continued to trend higher from a low base, influenced by subdued levels of income growth and cost of living challenges, most pronounced in outer metropolitan areas of Perth, Melbourne and Sydney.’

With the bank further adding that:

‘Accounts in negative equity represent just over 3% of total accounts, based on 31 March 2019 valuations. Approximately three quarters of the negative equity relates to Western Australia and Queensland.’

Though the Reserve Bank of Australia’s recent move to cut interest rates to a historic low of 1.0% should theoretically provide some relief to homeowners with mortgages; in practical terms, the overall conditions for consumers remains weak.

Indeed, by CBA’s own admission: income growth remains stagnant and the rising cost of living has created a number of difficulties for its customers. Because of this, it will be interesting to see if consumer arrears continued to trend higher in the fourth quarter and how such trends could impact the bank’s negative equity rates.

Capital requirements under pressure

In the third quarter, the Commonwealth Bank of Australia's all-important Common Equity Tier 1 (CET1) ratio came in at 10.3% – 0.2% below the levels required by APRA.

Mind you, CBA only came in under this threshold after the bank paid out its 2019 interim dividend.

Moreover, with the bank set to complete its divestment from CommInsure Life (pending regulatory approval), this should help lift CBA’s CET1 ratio by roughly 120 basis points in the near-term.

The sale of CommInsure should be finalised during the second half of the 2019 calendar year.

Commonwealth Bank share price: analysts cautious

Finally, according to the Wall Street Journal, of the 13 analysts covering the Commonwealth Bank of Australia, only one analyst rates it a buy.

By comparison, five analysts rate it a sell; with the overall consensus for CBA’s shares being underweight.

Even with this mixed outlook, CBA's stock remains one of the most heavily traded in Australia.

This, as noted above, is likely due to CBA’s consistently high dividend, as well as its enviable market leading position as the most valuable of the big four banks.

Year-to-date, the Commonwealth Bank of Australia's share price has risen 17.9%.