The Commonwealth Bank of Australia (ASX: CBA) share price has dropped 3% since 1 May 2023 and it is down 11% from 14 February 2023.
The last few months have been very interesting for the ASX bank share sector. When CBA released its FY23 first-half result in February, CEO Matt Comyn talked about intense competition in the sector. It sounded like bad news for a lot of the sector.
Earlier this week, the bank released its FY23 third-quarter update.
Let's have a quick reminder of some of those quarterly numbers.
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Earnings recap
It made $2.6 billion of cash net profit in the three months to 31 March 2023. This was a 10% increase year over year.
But, compared to the FY23 first-half quarterly average, cash net profit only grew by 1%. The bank said its income was flat – there was volume growth and higher non-interest income, but there were two fewer days in the quarter and lower net interest margins (NIM) from "competitive pressures".
But, expenses were also flat.
CBA reported a loan impairment expense of $223 million, which saw collective and individual provisions "slightly higher". The ASX bank share said that portfolio credit quality remained "sound".
The capital position on the bank's balance sheet is "strong", with a common equity tier 1 (CET1) ratio of 12.1%.
What to make of this?
Brokers were a bit mixed on what to think about this result and the CBA share price.
The Australian reported on comments by Citi's Brendan Sproules. He suggested that the CBA NIM in the third quarter was "surprisingly weak" at around 2.05%. Sproules said:
A soft result relative to market expectations, although not surprising given the context of recent peer results.
We think the implied NIM of about 2.05% for the quarter and lower monthly exit NIM implies a 4Q NIM that starts closer to about 2%.
Coupled with the funding task, this would explain CBA's price leadership on deposits, and also their recent flagged decision to moderate mortgage cash backs.
The Citi analyst suggests that the market is forecasting a NIM of 2.11% in the FY23 second half, which may mean the market reduces its profit expectations in the current half.
Citi currently has a sell rating on the business, with an $80 CBA share price target. That suggests a fall of around 18% over the next 12 months.
But, The Australian reported on UBS analyst John Storey's comments, who also noted the decline of NIM, which is also being seen by peers. But, it was noted that CBA's loan book is holding up well, which is supporting cash earnings.
But, Storey thinks that the bank is going to be able to hit the cash earnings target in the fourth quarter of FY23.
For UBS, the CBA share price target is $100 and it has a neutral rating. That suggests a possible rise of around 2.7%.
CBA share price snapshot
Since the start of the year, the CBA share price is down around 7%.
