Next week earnings season will ramp up with the release of the results of some of Australia's biggest companies.
One of these companies is Australia's largest bank, Commonwealth Bank of Australia (ASX: CBA).
Ahead of the release on August 7, analysts at Goldman Sachs have released a note explaining what investors ought to look for.
What should you expect from CBA next week?
According to the note, Goldman Sachs expects the bank to deliver FY 2019 cash earnings from continued operations (pre-one offs) of $8,566 million. This will be a decline of 3.9% on the prior corresponding period. On a per share basis, the broker expects the bank to report cash earnings of $4.67.
The good news for shareholders is that Goldman thinks CBA will reward its shareholders handsomely following its divestment of the Colonial First State business. It expects the bank to declare a final dividend of $2.31 per share and a special dividend of $1.00 per share.
The broker said: "On 25-Jul-19, CBA announced that it expected its divestment of CFSGAM to complete in early Aug-19, which would increase its CET1 capital by A$2.9bn, or c. A$1.60 per share. Given our expectation that this asset sale will likely be completed by the FY19 result, we now forecast a special DPS of A$1.00 will be announced at the FY19 result, as it opens up the opportunity for CBA to release a component of its c. A$1.7bn of surplus franking credits."
In respect to its key net interest margin metric, the broker has forecast a half on half decline of 3 basis points to 2.08%. It will also be looking for commentary around where management expects its margins to be going over the medium term.
This is because "the lower rate environment following the June and July RBA cash rate cuts will pressure margins and earnings into FY20E and we would be interested in any commentary on this front, particularly given CBA's relatively higher exposure to more rate inert deposits leaves it with less opportunity to reprice as cash rates fall."
And finally, Goldman expects the bank to report solid housing volume momentum in the second half.
"We expect CBA to report solid housing growth in 2H19E, at 1.4x system growth in the six months to Jun-19, offset by softer business lending momentum in the half (c. -1.4x system growth). On this front we would be interested in management commentary around the extent to which they can continue the strong housing momentum into FY20E and whether they can reverse the trends in business lending."
As you might have guessed from its concerns over margins and business lending trends, Goldman currently has a sell rating and $74.64 price target on the bank's shares. It prefers National Australia Bank Ltd (ASX: NAB) and has a buy rating and $30.40 price target on its shares.
