Commonwealth Bank shareholders have spent the past few days absorbed by reports of a massive failure by the bank to detect and report anti-money laundering behaviour, but on Wednesday attention will turn to the 2016/17 financial report.
Analysts are expecting earnings growth of just under four per cent and a dividend payout that will keep the dividend yield above five per cent.
Macquarie Securities has forecast that CBA will report cash profit of $9.8 billion for the year to June, an increase of 3.9 per cent over the previous corresponding period.
Macquarie expects net interest income to be up by 4.2 per cent. This modest growth in revenue will be boosted by low impairment expenses of $1.1 billion (down from $1.2 billion last year).
It expects the bank to pay a dividend of $4.30 a share, up from $4.20 last year. At Friday’s closing price of $80.72 a share, that dividend yield is 5.3 per cent.
The bank’s return on equity will be 15.9 per cent – down from 16.8 per cent the previous year.
UBS also expects CBA to report a cash profit of $9.8 billion. It expects the bank to pay a smaller dividend – $4.24 a share.
UBS expects that the bank’s bad debt charge, which has been at record lows, will remain benign, “given a resilient economy, low unemployment, a strong housing market and 26 years without a recession.”
Banks have taken advantages of the limits imposed on certain types of mortgages by the Australian Prudential Regulation Authority to re-price interest-only and investor loans.
According to UBS, since December last year the big banks have increased investor principle and interest mortgage rates by an average of 23 basis points, owner-occupier interest-only loans rates by 47 bps and investor interest-only rates by 64 bps.
CBA’s financial report will show just how much this re-pricing has helped with its margin.
UBS expects CBA’s net interest margin to be 2.09 per cent for the year – down from 2.1 last year.