is it about to go up

CBA – What to Expect Tomorrow!

In what is set to be one of the most eagerly anticipated results this year, CBA reports tomorrow morning. The banking heavyweight has fallen significantly since its November highs, particularly exacerbated by the overwhelming number of short positions being acquired in the stock. A solid profit result (which Macquarie Research Equities (MRE’s) analysts expect) has the potential to not only create a short squeeze rally in the stock, but will also to set the tone for the results of the rest of the banking sector. Banking sentiment has been tarnished over recent months, due mainly to the state of overseas financial heavyweights, so this result will have a material impact on broader market sentiment. This is what MRE expect tomorrow…..

MRE anticipate a 1H08 cash NPAT of $2.479bn which represents a 9.3% increase on 1H07 results.

Breakdown of Result
Wholesale funding costs will be a key issue for CBA and may impact on the firms result based on the degree of margin pressure in this area. The corporate loan book, however, is not likely to see any single name provisions and outlook statements should reaffirm an active monitoring of lending risk. On the basis on such comments, this should ease concerns of broader solvency issues in the corporate lending segment.

Institutional banking continues to perform as indicated in the 1Q trading update – furthermore recent RBA data reflected the fact that this growth had transpired into the 2Q. The consumer growth trend should also provide further support for the retail bourse. This is likely to come from the shift of clients from smaller lenders to the major banks as a result of housing market share gains.

MRE reiterates their $60.00 price target with the real catalyst being the outlook statements at the 1H08 briefing on 13 February. Positive commentary around the impact of asset repricing and limited risk from single infringements is expected.


Good luck shorters!