All eyes will be on the Commonwealth Bank of Australia (ASX: CBA) share price next month when it releases its half year results.
Ahead of the release, let’s take a look to see what the market is expecting from the banking giant on 9 February.
What is expected from CBA in the first half?
The team at Morgans is bearish on the CBA share price and has a reduce rating and $74.00 price target. In light of this, it will come as no surprise to learn that the broker is forecasting a half year result that falls short of the market’s expectations.
According to the note, the broker expects CBA to report a first half cash net profit after tax of $4.32 billion. This is 2% lower than the Visible Alpha consensus estimate of $4.406 billion and compares to $4.785 billion during the second half of FY 2021. This is being driven by its belief that CBA’s net interest margin (NIM) will be softer than the market is forecasting.
Morgans commented: “Our 1H22 NIM forecast of 186bps compares with Visible Alpha consensus of 191bps. We therefore see risk that the market will be disappointed on the NIM front.”
One item that Morgans is actually more positive on than the market is the bank’s expenses. It doesn’t expect them to increase as much as consensus estimates.
It commented: “CBA reported a 3% increase in the run-rate of operating expenses (excluding remediation costs) from 2H21 to 1Q22. We expect this increase to be 2% from 2H21 to 1H22 as a result of our expectation of greater annual leave usage in 2Q22. However, we are more optimistic than consensus on this front as consensus appears to be factoring in a 3% increase from 2H21 to 1H22.”
One final item that the broker will be looking for commentary on is the Omicron impact on its operations.
Morgans concluded: “By way of outlook for asset quality, we will be particularly interested to hear about what CBA is seeing on the SME front with the spread of Omicron.”
Food for thought for investors over the next couple of weeks before the big day.