All eyes will be on Commonwealth Bank of Australia (ASX: CBA) shares when it reports its half-year result later this month.
That is because CommBank is the only one of the big four banks due to report an interim result this month, which means its numbers are likely to shape sentiment across the entire banking sector during reporting season.
According to investment firm Wilsons, the upcoming result is expected to confirm that underlying sector fundamentals remain in good shape, even if it does little to change the valuation debate surrounding CBA's shares.
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Sector fundamentals still look sound
Wilsons expects Commonwealth Bank's result to reinforce that conditions across the banking sector remain relatively healthy. It said:
We expect the result to confirm that sector fundamentals remain sound, with continued solid credit growth, robust capital buffers and benign bad debt trends.
In other words, there is no expectation of stress emerging in the loan book or balance sheet. From a risk perspective, the bank appears well positioned.
The upgrade question looms large
The investment company notes that a key disappointment for some investors was that CBA failed to deliver an upgrade at its FY 2025 full-year result.
As a result, bullish investors will now be looking for signs that the bank can re-enter an upgrade cycle this reporting season. However, the broker is sceptical that this will happen. It adds:
After CBA failed to deliver an upgrade at its FY25 full year result, CBA bulls will be looking for a resumption of the bank's upgrade cycle this reporting season. A key focus specifically will be on costs, after CBA's OPEX was worse than expected in FY25 due to greater tech spend, rising staff costs and workforce mix changes.
Valuation remains a key issue
While Wilsons expects the result to confirm solid fundamentals, it does not see meaningful upside to consensus earnings estimates.
If CBA falls short, or merely meets consensus, the broker believes the rotation out of the stock is likely to continue. That is largely due to valuation. It explains:
[W]e don't see meaningful upside to consensus EPS estimates. If CBA's result meets or falls short of consensus, as we expect, the rotation out of the stock is likely to continue. In that scenario, bank sector performance should continue to broaden, given CBA remains on a material valuation premium to the sector (at a ~40% P/E premium to peers). This is despite CBA offering only comparable (~3-4%) EPS growth to peers in FY26, while being the only bank not currently in an earnings upgrade cycle.
