Broker upgrades CBA (ASX:CBA) shares to buy rating following 'great' half

CBA's shares are in favour with this broker…

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Key points
  • CBA's half year result impressed the team at Bell Potter
  • Australia's largest bank delivered a cash profit 8% ahead of its expectations
  • The broker has upgraded CBA's shares to a buy rating

The Commonwealth Bank of Australia (ASX: CBA) share price is pushing higher again on Thursday morning.

In morning trade, the banking giant's shares are up 0.5% to $100.00.

This means the CBA share price is now up almost 7% this week.

Three different hands against a blue backdrop signal thumbs up, indicating share price rise on the ASX market

Image source: Getty Images

Can the CBA share price keep rising?

One leading broker that believes the CBA share price still has room to climb higher from its current level is Bell Potter.

According to a note released this morning, its analysts have upgraded the bank's shares to a buy rating with a $108.00 price target.

Based on the current CBA share price, this implies potential upside of 8% for investors over the next 12 months.

In addition to this, the broker is forecasting CBA to pay a $3.87 per share fully franked dividend in FY 2022. If we add this into the equation, the total potential return on offer with its shares stretches to 12%.

What did the broker say?

Bell Potter was pleased with CBA's performance during the first half and notes that its cash earnings came in well-ahead of its estimates.

It commented: "CBA's $4.75bn cash NPAT was 8% higher than our forecast. […] Cash NPAT was nearly on par with 2H21, a great outcome. There was also investment in operational execution (in line with the bank's strategic priorities) coupled with a return of excess capital to shareholders of $2bn (on-market share buyback; surplus capital post buy-back would be around $4bn)."

This stronger than expected performance has led to Bell Potter increasing its cash earnings estimates for FY 2022 and FY 2023 by 11% and 8%, respectively. It is now forecasting cash earnings of $9,704 million and $9,842 million for the two financial years.

All in all, it appears to believe this makes the CBA share price great value at the current level.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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