It will be a big month for Commonwealth Bank of Australia (ASX: CBA) shares, with Australia's largest bank scheduled to release its half year results on Valentine's Day.
Will it be a day filled with roses for shareholders? Let's see what analysts at Goldman Sachs are expecting from the banking giant.
CBA half year results preview
According to a note, the broker is forecasting cash earnings from continued operations (pre-one offs) of $5,070 million.
This represents a 2.1% decline over the prior corresponding period but is a touch ahead of the consensus estimate of $4,972 million.
Conversely, despite forecasting an earnings beat, Goldman believes that the bank's dividend will come in lower than the market's expectations.
It has pencilled in a $2.10 per share fully franked interim dividend, whereas the market expects a $2.23 per share dividend.
Another area of focus will be the bank's net interest margin (NIM). Goldman had a few things to say about this metric. It said:
We estimated CBA's NIM as at 1Q24 to be around 2.01% and note CBA said home loan margins were stable over the quarter. Additionally, CBA highlighted the following key factors for NIM going into FY24: i) intensity of home loan and deposit price competition, ii) rate of customer deposit switching, iii) higher wholesale funding costs and, iv) earnings outlook on replicating portfolio & equity hedge continues to improve with higher exit tractor rates, but the outlook for cash rates will also impact this.
With the above in mind we currently forecast the 1H24E NIM to be -6 bp hoh, and will be interested to hear management's outlook around i) the extent to which mortgage profitability has improved, ii) the timing of RBA cash rate cuts, and iii) how the industry might balance profitability against political considerations around repricing.
Are CBA shares go value?
Unfortunately, Goldman is very much in the bear camp when it comes to CBA shares.
It believes "CBA's consumer banking skew leaves its earnings more exposed to sector wide headwinds."
As a result, it has a sell rating and $82.37 price target on its shares. This implies potential downside of 29% from current levels.
