Commonwealth Bank of Australia (AU:CBA) disappointed investors with lower profits for the first half of Fiscal 2024, ending December 31, 2023. The bank’s cash net profit after tax declined 3% year-over-year to AU$5.02 billion due to higher operating expenses and the impact of significant competition on margins. CEO Matt Comyn warned that the bank expects financial strain on the customers to continue in 2024, with higher loan arrears and impairments. CBA shares declined nearly 2% on Wednesday following the results.
CBA’s Results in Detail
CBA’s performance in the first half of Fiscal 2024 was impacted by compression in its net interest margin, which was down 11 basis points year-over-year to 1.99%. The bank blamed the margin compression on heightened competition, customers’ shift to higher-yield deposits, increased wholesale funding costs, and a lower contribution from New Zealand.
CBA cautioned that intense competition for both lending and deposits will persist this year and continue to weigh on the net interest margin. It is worth noting that CBA’s home loan balances fell by over AU$2 billion to AU$650.5 billion, as the bank maintained higher rates compared to some of its rivals.
The bank’s lower profits overshadowed the 2.4% rise in its fully franked interim dividend to AU$2.15 per share.
What is the Price Target for CBA Stock?
Following the results, three analysts reiterated a Sell rating on the stock. Meanwhile, UBS analyst John Storey reiterated a Hold rating on CBA stock with a price target of AU$105 (7.7% downside potential).
While Commonwealth Bank’s results did not meet expectations, Storey noted that the bank delivered $5 billion in cash net profit after tax despite facing intense pricing pressure in mortgages and deposits. “If the mortgage market rationalizes, CBA is well placed,” said Storey.
With two Holds and seven Sells, CBA stock has a Strong Sell consensus rating on TipRanks. The Commonwealth Bank of Australia share price target of AU$93.44 implies about 18% possible downside from current levels.
