CBA shares charge higher on 'earnings beat'

Here's what analysts are saying about the CBA result.

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Commonwealth Bank of Australia (ASX: CBA) shares are rising on Wednesday.

In morning trade, the banking giant's shares are up 2.5% to $104.81.

Why are CBA shares rising?

Investors have been buying CBA shares on Wednesday after Australia's largest bank released its FY 2023 results.

For the 12 months ended 30 June, CBA posted a 13% increase in operating income to $27,237 million and a 6% lift in cash net profit after tax to $10,164 million.

The former was driven by a 17-basis point increase in the bank's net interest margin (NIM) and volume growth across the business. The star of the show was CBA's business lending which increased by 11.4%. This was supported by home lending growth of 5%, household deposit growth of 5.2%, and business deposit growth of 2.8%.

CBA's cash profit didn't grow as quickly due to higher loan impairment expenses and operating costs. Nevertheless, it appears to have still beaten the market's expectations.

What are analysts saying?

The result was a touch ahead of expectations, which explains why CBA shares are charging higher today.

For example, Goldman Sachs was pleased with the company's performance. It commented:

CBA's FY23 cash earnings (company basis) from continued operations grew by 6% on pcp to A$10,164 mn, and was 1% ahead of our and Visible Alpha consensus expectations. The beat was driven by better-than-expected non-interest income (largely other non-interest income), offset by higher BDDs, which translated to a FY23 PPOP that was broadly in-line with our and Visible Alpha consensus expectations.

The broker also spoke a little about CBA's margins going into FY 2024. It said:

Given we estimated the 3Q23 margin was between 2.05% to 2.07%, in light of today's full-half margin of 2.05%, we estimate this implies the 4Q NIM was in the range of 2.03% to 2.05%. This compares to GSe 1H24E NIM forecast of 2.00%

If management can maintain its margins at the current level, then it would outperform expectations during the first half of FY 2024. Judging by its share price performance, some investors may believe that will be the case.

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 positions in and has recommended Goldman Sachs Group. 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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