The Commonwealth Bank of Australia (ASX: CBA) share price will be one to watch over the next few weeks in the run up to the release of its full year results in August.
Ahead of the release, the team at Bell Potter have revealed what they are expecting from the banking giant.
What to expect from the CBA full year result
CBA is scheduled to release its full year results in just over a month on 11 August. According to the note, Bell Potter is forecasting a cash net profit after tax of $8.51 billion for the 12 months ending 30 June. This will be an increase of 16.5% from $7.3 billion a year earlier. It also implies a half on half 19% cash net profit after tax increase in the second half.
Bell Potter expects this to be driven largely by a low loan impairment expense coupled with steady growth in operating income and a decline in operating expense.
Its analysts commented: "Our cash NPAT estimates on a continuing basis are increased by up to 20% mainly due to changes in loan impairment expenses (and with this decreasing to 6% in the following year). While we were caught off-guard by the speed of recovery in mainstream banking, we still expect operating income and operating expense growth to result in a 2-3% "Jaws" in the long term."
What about the CBA dividend?
Based on the current CBA share price, Bell Potter is forecasting an attractive dividend yield from the banking giant in August.
It estimates that the CBA dividend in 2021 will be a fully franked $3.34 per share, which represents a 3.4% yield. This comprises a final dividend of $1.84 cents per share and its interim dividend of $1.50 per share.
Looking ahead, the broker is expecting the CBA dividend to continue to increase in the years that follow. And expects it to exceed a 4% yield by 2023.
Is the CBA share price in the buy zone?
Bell Potter has increased its CBA share price target to $105.00 but lowered its rating to neutral.
It explained: "The price target is increased by $15.00 to $105.00 as such. CBA's better dividend prospects in the medium term (yield reaching back to around 4.0% by 2023) and solid recovery in consumer, business and institutional banking may be intact but we have decided to lower the rating from Buy to Hold in the meantime."
