The Commonwealth Bank of Australia Ltd (ASX: CBA) share price closed 1.1% lower this week despite an Australian Financial Review (AFR) article discussing the bank's digital banking transformation.
What did the AFR article say?
According to Wednesday's article, Commonwealth Bank will improve its current banking application to provide customers with more advice and insights on what to do with their money.
This advice is part of the bank's adaptation of current digital banking trends as "neobank" startups and more nimble banks threaten to steal away customers looking for simpler and more efficient digital banking options.
The article said that CBA will use artificial intelligence (AI) technology to "advise customers whether a tax return should be saved, if they are entitled to claim a government subsidy, or if the costs of their automated digital subscriptions rise."
CBA hopes that the upcoming changes will improve its user experience for its 7 million digital customers, increase the "stickiness" of its banking offering and prevent a mass movement towards the latest wave of "neobanks" set to enter the Australian banking battle.
The article quoted CBA retail banking head Angus Sullivan as saying, "We are extremely alive to the threat from all of our competitors, whether it be a large bank, second-tier bank or neobank… it spurs all of us to do better in the digital domain."
How has the CBA share price performed?
The CBA share price edged 1.1% lower last week to $81.88 per share – still a little way shy of its $83.99 per share 52-week high set in the last fortnight.
With CBA set to report its full-year results on 7 August 2019, I'd be keeping an eye on the bank's net interest margin (NIM) to see if the recent RBA rate cuts and falling interbank swap rate (BBSW) have boosted its year-on-year profitability.
CBA's status as a blue-chip comes with a healthy dividend for investors, with the bank currently paying 5.26% per annum, and with National Australia Bank Ltd (ASX: NAB) recently cutting its dividend, I'd be watching to see if management makes any changes in August.
Another big area that I'd be looking at CBA's regulatory capital levels, with the bank recently coming in under APRA's required 10.5% Common Equity Tier 1 (CET1) with 10.3% (after its dividend payout).
I'd expect that CBA would have its regulatory capital requirements well under control, but any further dips ahead of 1 January 2020 could be cause for concern for the bank's investors.
Personally, I'd be looking at CBA as a barometer of what to expect from its fellow Big Four peers in October/November and would be waiting to see what Australia's largest bank produces before buying into its shares.
