Next week is certainly going to be a very big one for the Australian banking sector.
On Monday afternoon after the market closes, the Royal Commission final report and its recommendations are going to be unveiled.
Then on Wednesday it will be the turn of Commonwealth Bank of Australia (ASX: CBA) to take centre stage with the release of its half year results.
To help you prepare for the latter event, I thought I would provide a quick summary of what is expected from Australia's biggest bank.
What is the market expecting?
According to a note out of Goldman Sachs, it expects CBA to deliver first half cash earnings excluding one-offs of $4,695 million. This will be an increase of 2.1% on the prior corresponding period.
On a per share basis, its analysts have pencilled in cash earnings of 257.1 cents, up 0.3% on the same period last year.
In light of this, a dividend of 200 cents per share is expected to be paid to shareholders, which is in line with the prior corresponding period and 2 cents short of the Bloomberg consensus estimate.
Other key metrics to watch out for are of course its net interest margin (NIM), its bad and doubtful debts (BDD), and its CET1. Ratio.
Goldman expects CBA to reveal a slight decline in its NIM to 2.11%, a reduction in BDD to gross loans and acceptances to 14 basis points, and a CET1 ratio of 10.4%.
In respect to the NIM decline, Goldman believes this will have been triggered by higher funding costs and increased price competition for home loans.
Should you invest?
While I wouldn't invest in any of the banks until the Royal Commission final report is released on Monday, if the report is in line with expectations then I think CBA could be a decent investment option.
However, due to their exposure to a strong performing business lending market, I would choose Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) shares ahead of it.
