Why is the CBA share price charging higher today?

CBA shares are charging higher on Tuesday…

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

In morning trade, the banking giant's shares are up over 1.5% to $106.86.

Why is the CBA share price pushing higher?

Investors have been bidding the CBA share price higher on Tuesday after responding positively to the bank's first quarter update.

For the three months ended 30 September, CBA reported a 9% jump in operating income and a 2% increase in cash earnings over the second half average to $2.5 billion.

Australia's largest bank reported net interest income growth of 16%, which was driven by higher deposit earnings, volume growth across core products, and the benefit of rising rates. This was offset by weaker non-interest income.

What has the reaction been?

Analysts at Goldman Sachs were pleased with the update. The broker highlights that CBA's earnings are tracking ahead of its first half estimates. Goldman said:

Cash profit from continuing operations in 1Q23 of c.A$2.5 bn was up 13% vs 1Q22 and run-rating c.5% ahead of what is implied by our 1H23E forecasts.

The better-than-expected cash earnings result was due to a combination of lower-than-expected BDD charge and a better than expected NIM [net interest margin] performance, albeit not inconsistent with what we have seen from peers. Against this, non-interest income was weaker (trading, DVA and floods), and costs were a bit higher, such that PPOP was run-rating c.1% above our implied 1H23E forecasts.

And while Goldman notes that the bank didn't reveal its NIM for the period, the 16% increase in net interest income paints a positive picture. This could be giving the CBA share price an added boost today. It said:

CBA did not provide a NIM for the quarter; however, we note that net interest income was very strong at +16% vs 2H22 average and was run rating 5.5% above our 1H23E forecasts. Based on current GSe balance sheet forecasts, and the fact liquids seem to have grown stronger than loans in the quarter, we estimate a 1Q23 NIM of between 2.05% to 2.10% (which is >10bp higher than our current 1H23E), with its trajectory into 2Q likely still higher.

As things stand, Goldman Sachs has a sell rating and $88.33 price target on CBA's shares. Though, this recommendation and price target could change in the coming days once the broker has fully absorbed the update.

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.

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