The Commonwealth Bank of Australia (ASX: CBA) share price is under the microscope this week as the big S&P/ASX 200 Index (ASX: XJO) bank share holds its annual general meeting (AGM).
AGMs are important – not only do shareholders get to vote on certain matters, such as directors, but other issues can also be raised. Plus, the company's leadership can tell shareholders about expectations and perhaps performance for the year ahead.
Banks are increasingly coming under pressure to limit their lending to fossil fuel businesses. Indeed, that's one of the things that shareholders will be voting on.
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Climate resolution
There has been a resolution put to CBA by Market Forces that calls for banks like CBA to "disclose information demonstrating how their financing will not be used for the purposes of new or expanded fossil fuel projects".
Market Forces pointed out that the big four banks of CBA, Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ), and National Australia Bank Ltd (ASX: NAB) recently co-financed a $1.4 billion deal for Santos Ltd (ASX: STO) for the Barossa gas project.
Market Forces notes that funding these fossil fuel projects is happening even though CBA, NAB, and Westpac said they were going to restrict some direct financing for new oil and gas fields.
Will van de Pol, asset management campaigner from Market Forces, said:
Despite committing to support the Paris Agreement and net zero emissions by 2050, all of Australia's big four banks are still financing companies with coal, oil and gas expansion plans that undermine those climate goals.
It's unacceptable to a growing number of retail shareholders and institutional investors that Commonwealth Bank, ANZ, NAB and Westpac are exposing themselves to heightened risk by financing companies that are worsening the climate crisis.
However, reporting by the Australian Financial Review suggests that CBA shareholders may reject that proposal.
What might affect the CBA share price?
It could be one of the most interesting AGMs of the past decade, and it could influence the CBA share price.
We're in a very different time now compared to the start of the year when interest rates were a lot lower.
CBA is the biggest lender in Australia. It has a huge loan book that is focused on mortgages.
With the lending rate cranking up at a very fast pace, there has been a lot of focus on how much this could help CBA's net interest margin (NIM). That's the profit that a bank makes on its lending, comparing the loan rate to the cost of funding (such as savings accounts).
If CBA tells investors about what its expectations for the NIM are for FY23, it would be very illuminating for how much profit it could generate and whether competition in the lending space is still detracting from lending profit. A higher NIM could be helpful for the CBA share price.
I'll be curious to see how optimistic, or not, the comments from the CBA boss are. If he talks about households and businesses still being in a strong financial position, then that could suggest the Reserve Bank of Australia (RBA) will need to keep going to rein in spending and inflation.
If the commentary is muted and cautious, then that may be good news for the RBA. But, it could also raise questions about future loan arrears in 2023.
We live in interesting times, so it'll be curious to see how much colour we actually get from CBA tomorrow. Either way, one expert thinks that CBA is the 'go-to' bank as an investment.
