Commonwealth Bank of Australia (ASX: CBA) shares were under pressure on Thursday.
The banking giant's shares dropped 1.5% to $114.07 following broad market weakness and the release of its half-year results.
Should you buy CBA shares?
The team at Goldman Sachs has been running the rule over the bank's results and was relatively pleased with what was reported. It said:
CBA's 1H24 cash earnings grew by 3% hoh and were -1%/+2% versus GSe / Visible Alpha consensus expectations (VAe). The quality of the result was good, with PPOP +2%/+1% vs. GSe/VAe, largely on account of expenses.
However, the broker saw nothing in the result that it believes can justify the premium that CBA shares trade on compared to the rest of the big four banks. It adds:
CBA's relative NIM resilience was evident in today's result and was attributed to i) the effective management of its volume vs. margin trade-off, supported by ii) its deposit franchise strength.
Despite this, we do not think this justifies the 55% 12-month forward PPOP premium CBA is currently trading on versus peers (ex-dividend adjusted), compared to the 29% 15-year average.
In addition, it highlights that the bank is facing competitive and cost pressures. It said:
Coupled with i) a business mix that leaves it more exposed to the current competitive environment, and ii) the fact we do not think it can escape elevated FY24E cost pressures given heightened inflation, despite historically good performance on balancing investment and productivity, we stay Sell.
In light of the above, the broker has reiterated its sell rating with a trimmed price target of $81.98 on CBA's shares (from $82.37). Based on its latest share price of $114.07, this implies potential downside of 28% for investors over the next 12 months.
