The Commonwealth Bank of Australia (ASX: CBA) share price has dropped 4% since the start of the month. So, it already looks like a rough month unless CBA can recover. The S&P/ASX 200 Index (ASX: XJO) is down as well but the 1.5% drop isn't as bad.
Most companies report their result in February like CBA, but a few ASX bank shares have a different financial calendar.
This week we've heard about the results from National Australia Bank Ltd (ASX: NAB), ANZ Group Holdings Ltd (ASX: ANZ) and Macquarie Group Ltd (ASX: MQG).
While CBA is a different bank, I think comments by those institutions about the outlook can be very informative.
Worrying outlook for ASX bank shares
Yesterday, NAB's CEO reported that the impact of higher living and interest costs on household spending and the broader economy is "becoming more evident" with consumption and overall growth in Australia starting to "soften".
NAB said that the Australian home lending segment is facing a number of headwinds including "slowing credit growth along with heightened refinancing activity and competitive pressures."
NAB also mentioned that the competitive pressures are increasing.
ANZ's CEO Shayne Elliot had similar sorts of things to say about the upcoming period in comments given with the FY23 half-year result:
The next six months will be more difficult than the last. Competition in retail banking is as intense as it has ever been, both in Australia and New Zealand. We understand that sustained higher inflation and interest rates create further challenges for some households and businesses across the economy. While the number of ANZ customers in difficulty remains low, we stand ready to help in these potentially challenging times.
Macquarie is one of the banking businesses that is really 'bringing it' to the big banks, including CBA.
In Macquarie's FY23 result, the banking and financial services (BFS) division saw 22% growth in the average loan portfolio and 31% growth in average deposit volumes.
Macquarie's banking division expects growth in the loan portfolio and deposits, though it will see "higher expenses to support volume growth, technology investment, compliance and regulatory requirements".
What does this mean for the CBA share price?
I think the CBA share price decline that we've seen over the past few days, and since February, reflects the uncertainty regarding lending competition.
Remember that the CBA share price has dropped over 13% since February 2023, which is quite a large fall considering there isn't anything dramatic happening in Australia. At this stage anyway.
If arrears started increasing, this could be a problem. But, I don't think that's going to happen in May.
However, it seems that the net interest margin (NIM) benefits have peaked, so I wouldn't expect a strong rebound over the next few weeks.
But, I would be cautious about more banking pain in the northern hemisphere, which could affect sentiment about banks here, even if it doesn't have much to do with CBA shares directly.
Using the (independent) forecast on Commsec, the CBA share price is valued at 16 times FY23's estimated earnings. So, it's cheaper than it was but it still has a higher price/earnings (P/E) ratio than the other major ASX bank shares.
