Owners of Commonwealth Bank of Australia (ASX: CBA) shares will probably have seen the ASX bank share report its results earlier this week.
The bank revealed that pre-provision profit only grew by 3% to $15.5 billion, while cash earnings grew by 4% to $10.25 billion.
That seemingly wasn't enough profit growth for investors, with the CBA share price falling by over 5% on the day of the result.
But, for the bank to justify its current valuation, it may need to deliver pleasing profit growth in the coming years.
Let's look at predictions from UBS about how CBA's net profit could travel in the next few years, starting with the new financial year, FY26.
FY26
UBS notes that CBA is "playing the long game", notably around AI investments, which could help efficiency improvements. But, more immediate headwinds on the net interest margin (NIM) and rising costs "are the focus".
The broker said that deposit competition and lower benefits from interest rate hedges "is likely to drive NIM downgrades". In other words, the broker is expecting the profit margin CBA makes on its lending will reduce.
On the positive side of things, CBA's investment in AI "excites" UBS because of the possibility "of the group driving sustainable, long term improvements to their operating model and per unit economics, notably on cost to income".
After taking all of the above into account, the broker decided to reduce its cash earnings per share (EPS) projections for FY26, FY27, and FY28 by 0.8%, 2.8%, and 3.7%, respectively.
Despite that, UBS is projecting that CBA's net profit could increase to $10.75 billion in FY26, and earnings growth can still occur.
FY27
The 2027 financial year could see the bank deliver an improved profit, even if it is only a small rise year over year.
UBS is currently suggesting that in FY27, the ASX bank share's net profit could increase by 1.2% to $10.9 billion.
FY28
In the 2028 financial year, CBA could deliver yet another year of profit growth for owners of CBA shares.
UBS is forecasting that the Commonwealth Bank of Australia could achieve a net profit of $11.25 billion in FY28, which would represent a year-over-year increase of 3.3% for the ASX bank share.
FY29
The 2029 financial year could see further profit growth for Commonwealth Bank, with UBS predicting that net profit growth could accelerate.
The broker is suggesting CBA's net profit could increase by 4.8% to $11.8 billion in FY29.
FY30
The final year in this series of projections is the 2030 financial year.
A lot can change between now and then, but the analysts from UBS are predicting FY30 could be the best year of all for CBA.
The broker forecasts CBA's net profit could rise by 4.8% year over year in FY30 to $12.4 billion. If it achieves the projected numbers, it means net profit would rise by around 15% between FY26 and FY30.
Commenting on the valuation, UBS suggests the CBA share price is valued on a price-to-book value ratio of 4x.
UBS concluded its thoughts on the bank:
Longer term, CBA's share price performance, in our view, should be more dependant of underlying earnings, NTA growth and capital returns. We maintain our Sell rating with a $125/share price target.
