CBA share price pushes higher on consensus-beating quarterly update

CBA’s Q3 update has smashed expectations. Here’s by how much…

| More on:
A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • CBA's shares are rising following the release of its third quarter update
  • Australia's largest bank has reported a cash profit of $2.4 billion for the three months
  • This has smashed the market's expectations

The Commonwealth Bank of Australia (ASX: CBA) share price is rising on Thursday.

In morning trade, the banking giant’s shares are up 0.7% to $102.19.

This compares favourably to a decline of 0.8% by the ASX 200 index.

Why is the CBA share price rising?

Investors have been bidding the CBA share price higher today after responding positively to the bank’s third-quarter update.

For the three months ended 31 March, compared to the quarterly average during the first half, Australia’s largest bank reported a 1% decline in operating income to $6,103 million and flat cash earnings of $2,400 million.

This reflects 3% volume growth and higher non-interest income, which helped offset continued margin pressure from elevated swap rates, mix effects, and competition.

How does this compare to expectations?

As you might have guessed with the CBA share price outperformance today, this result was better than the market was expecting.

For example, the team at Goldman Sachs note that the bank’s quarterly cash earnings are run rating 10% ahead of its second half forecasts. It said:

Cash profit from continuing operations in 3Q22 of c.A$2.4 bn was flat on the 1H22 quarterly average but run-rating c.10% ahead of what is implied by our 2H22E forecasts.

And while the broker acknowledges that a bad and doubtful debts (BDDs) benefit helped drive the stronger than expected result, it highlights that its pre-provisioning operating profit (PPOP) was still ahead of expectations. Goldman said:

The better-than-expected cash earnings result was largely due to lower-than-expected BDDs (benefit of A$48 mn), but PPOP was also run-rating c.4% above our implied 2H22E forecasts on better performance on costs (NIMs and revenues largely in line with GSe).

CBA smashes consensus estimates

CBA also outperformed Citi’s estimates, which were already sitting 3% ahead of consensus forecasts. The bank’s cash profit was 6% ahead of the broker’s expectations and 9% ahead of the analyst consensus estimate.

Another positive was CBA’s net interest margin (NIM). While the bank didn’t reveal what its NIM was, Goldman Sachs estimates that it was 1.87%. Although this is down from 1.92% during the first half, it is ahead of Goldman’s second half estimate of 1.86%.

All in all, CBA has been given the tick of approval for its third quarter. However, at this stage, both Citi and Goldman don’t see enough value in the CBA share price to recommend it as a buy.

They continue with their sell ratings. Though, that could change once they have updated their financial models.

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 Scott Phillips.

More on Bank Shares

Four businessmen in suits pose together in a martial arts style pose as if ready to engage in competition or spring into a fight.
Bank Shares

Volt gets packing as ASX 200 bank shares prove to be a formidable force

The big banks beat out the market today. Here's what happened...

Read more »

BNPL written on a smartphone.
Bank Shares

Own CBA shares? Here’s how the major bank’s bet on Klarna is holding up

The buy now, pay later sector is hurting, but is CBA still sitting on a gain with Klarna?

Read more »

a mature but cool older woman holds a watering can and tends to a healthy green plant growing up the wall in her house.
Bank Shares

In the green: Why the NAB share price is rising on Wednesday

Is this bolstering the banking giant's stock today?

Read more »

A women cheers with clenched fists having read some good news on her laptop.
Bank Shares

Why is the ANZ share price outperforming the ASX 200 today?

ANZ shares are pushing higher despite the market weakness...

Read more »

Broker looking at the share price.
Bank Shares

Westpac share price inches ahead despite broker cutting its price target by 16%

Westpac shares are edging higher despite a bearish broker note...

Read more »

Young boy wearing suit and glasses adds up Westpac dividends paid since 2017 on his calculator
Dividend Investing

How much has Westpac paid in dividends in the past 5 years?

We calculate all the dividends Westpac has paid to shareholders since 2017.

Read more »

A green-caped superhero reveals their identity with a big dollar sign on their chest.
Bank Shares

ASX 200 bank ANZ turns to crypto for carbon credit settlement

The carbon trading market is forecast to grow as the world continues work to slash greenhouse gas emissions.

Read more »

Four businessmen in suits pose together in a martial arts style pose as if ready to engage in competition or spring into a fight.
Bank Shares

CBA share price leads the big four as banks outperform ASX 200 on Monday

Why are the big four ASX bank shares leading the ASX 200 gains today?

Read more »