CBA could be eyeing record profits if first-half results echo the past

Commonwealth Bank of Australia (ASX: CBA) shares will be in focus next week when the banking giant releases its half-year results.

As a reminder, this time last year, Australia’s largest bank released its results and reported record operating income of $13,593 million and record cash net profits of $5,153 million.

This was driven largely by volume growth in core products and a recovery in its net interest margin.

Since the release of this result, interest rates have risen further, potentially giving bank margins a nice boost.

So, could this lead to CBA reporting record profits again next week? Let’s find out.

Will CBA deliver another record result?

The short answer is, probably not.

The market is expecting CBA to post a small decline in profits for the first half of FY 2024, before realising a larger decline on a full-year basis.

For example, the consensus estimate for the first half is a cash profit of $4,972 million.

Goldman Sachs is a little more positive and has pencilled in $5,070 million. Close but no cigar. After which, the broker is forecasting cash earnings of $9,615 million for FY 2024, which represents a 4.5% decline year on year.

This is expected to be driven by a falling net interest margin (NIM), with the broker forecasting a decline to 1.98% (from 2.07%) in FY 2024. It then expects the trend to continue in FY 2025, with a NIM of 1.91% dragging its cash profits to $9,113 million.

Overall, Goldman appears to believe we have seen peak earnings for CBA.

But it is worth remembering that Australia’s largest bank does have a habit of outperforming expectations. So, while a record result next week is unlikely, you can’t rule it out completely.

CBA shares are up 11% over the last six months.

The post CBA could be eyeing record profits if first-half results echo the past appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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