This time next week Commonwealth Bank of Australia (ASX: CBA) will be releasing its first half results.
This release will no doubt be one of the most eagerly anticipated results during earnings season.
In order to prepare you for it, I thought I would take a look at what the market expects the banking giant to report.
What is the market expecting from CBA?
According to a note out of Goldman Sachs, its analysts are expecting the bank to report cash earnings from continuing operations (pre-one offs) of $4,329 million.
This will be a 7.4% decline on the prior corresponding period and a touch lower than the consensus estimate of $4,405 million.
Despite the decline in half year cash earnings, Goldman Sachs expects the bank to hold firm with its fully franked interim dividend of 200 cents per share. This is in line with the market's expectations.
Capital management delayed.
There is speculation that Commonwealth Bank will announce capital management initiatives with its first half results.
However, Goldman Sachs expects this to be delayed until the release of its full year results in August.
The broker said: "We think CBA will not announce capital management until i) it has received all capital from asset sales that have been announced but not yet completed, and ii) potential regulatory changes are finalised."
"With the sale of CBA's life insurance business now not expected to be completed until Jun-20, and uncertainty remaining in relation to timing of the completion of APRA's capital review framework, we think CBA will likely hold off announcing capital management until its 2H20 result in August," it explained.
At that point Goldman Sachs expects the bank to announce a $2.5 billion off-market share buyback.
Net interest margin.
Goldman Sachs has forecast a deterioration in the bank's net interest margin.
Although it was up during the first quarter, the broker feels the operating environment will have continued to deteriorate through the second quarter. It expects this to drive a 3 basis point half on half reduction in its net interest margin.
Though, it does note that there is potential for the bank to surprise given that system (high margin) transaction deposit growth has been much stronger than non-transaction deposit growth in recent months.
Business in good shape.
It's not all doom and gloom, though. Goldman appears happy with the overall performance of the bank, but just not enough to justify its current share price.
It notes: "While the operating environment remains difficult for CBA's high quality mortgage and low cost deposit franchise, the business is performing well, with APRA data suggesting that, over the last six months, CBA has picked up share in housing and business lending and total deposits"
It has retained its sell rating and $76.29 price target on CBA's shares. The broker prefers National Australia Bank Ltd (ASX: NAB) and has a buy rating and $29.84 price target on its shares.
