The Commonwealth Bank of Australia (ASX: CBA) share price has almost doubled from its March 2020 lows of $54.
There appears to be considerable momentum currently behind CBA shares. They topped both their pre-COVID and 2015 highs in May this year and traded above $100 for the first time on record in June.
However, the stellar performance of CBA shares could warrant higher earnings expectations, especially given the current circumstances of a strong recovery in credit growth and the red-hot property market.
With the August 2021 earnings season gearing up, let's take a step back and look at how the CBA share price performed during the last reporting season.
What happened last earnings season?
The CBA share price experienced a strong rebound following the initial March 2020 selloff – as did most ASX 200 shares.
Between March lows and 11 August, the day before the bank delivered its full-year FY20 results, the CBA share price had rallied 37.7% from $54.26 to $74.70.
When CBA's results landed, the company's shares would open 1.70% higher to $75.97 but failed to hold their gains, closing the day down 0.48% to $74.34.
Some key highlights from Commonwealth Bank's FY20 results included:
- Operating income of $23,758 million, up 0.8% on the prior corresponding period.
- A net interest margin decline of 2 basis points to 2.07%.
- Home lending growth at 1.3x system and household deposit balance growth of 9.8%.
- Cash net profit after tax from continuing operations down 11.3% to $7,296 million, driven by higher COVID-19 loan impairment expenses.
- Final fully franked dividend of 98 cents per share, or a dividend payout ratio of 49.95%. This was in line with APRA's guidance that banks should retain at least 50% of earnings.
- CET1 ratio of 11.6%, well ahead of APRA's 'unquestionably strong' benchmark of 10.5%.
Despite what looked like a well-rounded result, the CBA share price would continue to slide, slumping to 4-month lows of $63.07 by 22 September.
It wasn't until mid-November that the CBA share price would climb back to the $70 level.
What should investors watch out for this earnings season?
The CBA share price has been supported in 2021 by a strong uplift in credit growth and property prices.
Lending indicators from the Australian Bureau of Statistics for July highlighted a 1.6% month-on-month decline in new loan commitments for housing but these were still 82.7% higher when compared to a year ago.
National housing values have continued to advance, surging 16.1% over the past year according to CoreLogic.
However, investors will likely be keeping an eye out for the impact of recent lockdowns across the country.
According to National Australia Bank Ltd (ASX: NAB), Australia's economy might be double dipping into another recession this year.
CBA is scheduled to release its FY21 full-year results on Wednesday 11 August.
CBA share price snapshot
CBA shares are up 5.30% in August and have rallied 25.30% year to date.
After closing at $104.94 on Monday, the CBA share price is less than 2% away from its 17 June record high of $106.57.
