Australian earnings preview – Commonwealth Bank of Australia

Australia

Full-year earnings preview:

The Commonwealth Bank of Australia (CBA) is Australia’s largest bank and provides a variety of financial services including retail, business, and institutional banking, funds management, insurance, investment, and broking services. It reports its full year numbers on the 12th of August.

While Coronavirus has impacted most sectors, the Australian banking industry has been particularly hard hit. CBA has put aside $1.5 billion for bad debts and taken steps to minimize risks arising from the economic slowdown including freezing payments on personal, home, and business loans.

Earlier this year credit rating agencies downgraded the outlook for the big 4 banks, while the banking regulator, APRA asked banks to defer dividend payments completely. More recently APRA confirmed banks should “cap dividends at 50% of earnings” a more positive development for investors.

As a guide, if CBA were to declare dividends at 50% of consensus statutory EPS estimates of 490 cents per share then the FY20 dividend will come in around 245 cents per share or 3.4% full franked. Consensus forecasts for revenue for the full year are flat at $24.5 billion from $24.4 billion the previous year.

Technically, the rally from the March $53.44 low, appears to be corrective rather than impulsive. Trend channel resistance is viewed around $77.50 near to where prices accelerated lower from in early March after the onset of the pandemic.

On the downside, there is a convergence of horizontal support near $68.00 before medium-term support at ~$65.00 coming from trend channel support and the mid-June $65.30 low.

Australian earnings preview – Commonwealth Bank of Australia

Source Tradingview. The figures stated areas of the 30th of July 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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