It's beginning to sound like a broken record whenever we discuss the Commonwealth Bank of Australia (ASX: CBA) share price. The country's most valuable listed company has notched up another fresh all-time high this morning, seemingly snubbing a financial impact on its upcoming full-year results.
Shares in the banking giant are relatively flat in afternoon trade, swapping hands at $137.33 apiece. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is up 0.46%. CBA shares reached a new all-time high of $138.24 earlier in the session.
Image source: Getty Images
Impact on upcoming results
To ensure there are no nasty surprises in its results, the banking major has provided details on some prickly financial happenings in the last financial year.
Firstly, CBA expects to book an after-tax, non-cash loss of $298 million in its FY24 results relating to the divestment from PT Bank Commonwealth (PTBC). For context, PTBC is one of the largest banks operating in Indonesia. The impact comprises three parts:
- Impairment loss of $133 million on net assets after a revaluation in the first half
- $100 million loss related to the asset sale in the second half
- Separation costs of $65 million
Commonwealth Bank finalised its divestment of its 99% shareholding in PTBC on 2 May. As shown in the chart below, the CBA share price has rallied 19% since then.
CBA said it would book the loss under continuing operations, and the transaction had a 'neutral' effect on the group's common equity tier 1 ratio, which measures a bank's capital buffer.
Secondly, the Big Four constituent will recognise $89 million of provisions. The money is being set aside for costs arising from transitioning Bankwest to a digital bank, as well as rebranding its business banking segment to CBA.
The bank intends to exclude the $89 million provision from its FY24 underlying operating costs.
'Tis but a scratch for the CBA share price
When combined, the total cost to CBA for FY24 is anticipated to be $387 million. However, it likely won't leave the banking giant begging on the street.
Commonwealth Bank of Australia delivered a net profit after tax (NPAT) of $10.2 billion in FY23. As my colleague Tristan Harrison notes, analysts at UBS think CBA's profits will be $9.98 billion in FY24, down 2.2% year over year.
The expected financial impacts would equate to roughly 3.9% of UBS' forecast CBA earnings.
Arguably more important will be whether investors stay content paying a large premium on the CBA share price. At the time of writing, shares trade on a price-to-earnings (P/E) ratio of nearly 24 times, almost two-and-a-half times the global average for the banking industry.
