question for acouch, page-9

cba’s underperform rating has been maintained. Commonwealth Bank of Australia – Caveat Emptor...trouble extends beyond poor investment markets

Commonwealth Bank (CBA) shares have underperformed the sector by 17% in the past two years. In the next 12 months, Smith Barney believe there may be ‘more of the same’. CBA’s Underperform rating has been maintained.

Smith Barney feel that CBA is facing problems in its core banking franchise – representing ~85% of group earnings. This has been evident from the rates of growth in core lending products reported by the four other banks in their 1H03 results.

Banking market share loss represents the single biggest threat to CBA’s earnings turnaround.

Smith Barney have pulled back FY03e earnings estimates by 1.5% - now forecasting 0% growth for the year. Similar adjustments have been made to forward years.

The upcoming strategy/operational update on 20 May to investors will be interesting. Historical comments on earnings (eg. ‘two years earnings neutral’ impact of Colonial acquisition), efficiency (scale and unit cost advantage) and market share (impact of mortgage brokers).

http://www.egoli.com.au/egoli/egoliWarrantsPage.asp?PageID={B35A45BE-9540-4903-A385-1E1430EDB326}