Commonwealth Bank of Australia (ASX: CBA) shares are back on form on Friday.
In afternoon trade, the banking giant's shares are up almost 1% to $102.38.
Though, that doesn't take away from the fact that CBA's shares are still down over 8% from the 52-week high they reached this month.
This weakness has been driven by the release of the bank's half year results, which appeared to indicate that its net interest margin (NIM) has peaked well ahead of expectations.
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Are CBA shares in the buy zone now?
Analysts at Morgans have been looking over CBA's half year result and have given their verdict. The broker said:
The 1H23 result was solid, with strong operating profit growth partly offset by the reversal of credit impairment releases into expensing. Cash returns were lifted via higher dividends and buybacks. The key negative was the seemingly early peak in the NIM and concerns for a weakening domestic economy and mortgagor.
In light of this, the broker has not seen enough to change its recommendation and has reaffirmed its hold rating with a $96.11 price target. This implies potential downside of 6.1% for CBA's shares over the next 12 months.
Though, this is partly offset by Morgans' forecast of a $4.50 per share fully franked dividend in FY 2023. This equates to a 4.4% dividend yield at current prices.
Shares do 'not look cheap'
Overall, the broker is a fan of CBA but would rather pick up shares at a cheaper level. It concludes:
While our valuation has increased and the share price has fallen from recent all-time highs, the stock still does not look cheap on either DCF or historical trading multiple ranges. For income investors, CBA's current forward cash yield of c.4.4% now looks compressed vs deposit rates.
Furthermore, there is potentially more downside risk if we are at peak earnings and the narrative is cyclically changing away from NIM expansion to cost growth (including normalising credit impairment expense) and risks to asset quality. CBA remains a core long term portfolio holding, and is the highest quality major bank, but its short term investment performance may be limited.
