It's fair to say that October hasn't been overly kind to Commonwealth Bank of Australia (ASX: CBA) shares.
But will things be any better in November? Let's see what's on the horizon that could have an impact on the banking giant's shares.
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What's on the agenda for CBA shares next month?
November could be a very big month for CBA shares.
Firstly, next week we have the Reserve Bank's cash rate meeting. As things stand, the market is effectively pricing in a 50:50 chance of a hike at the meeting. A hike could be a positive for the bank's margins, though it could also put pressure on bad and doubtful debts.
But the main event for CBA's shares will of course be the bank's first quarter results. They are scheduled to be released in the middle of the month on 14 November.
What should you expect from CBA's results?
There are a few things to watch out for with this update. The first is its cash earnings, which Goldman Sachs is expecting to decline this year.
While the broker has not provided a quarterly estimate, it is expecting a 7.3% decline in cash earnings to $9,425 million for FY 2024. Investors may want to look to see if CBA is run-rating ahead or behind this during the quarter.
Another thing to look out for might be the bank's aspirations in business banking. Goldman notes that CBA is looking to take on the leader in the space, National Australia Bank Ltd (ASX: NAB). The question will be whether it does this at the expense of its margins. The broker said:
CBA has been vocal about its aspirations to compete aggressively in business banking. While there is potential for this to apply pressure on NAB as the incumbent in this space, to date, neither NAB nor CBA has been talking about margin pressure in this segment. We see evidence of NAB's ability to co-exist with CBA in this segment in APRA monthly ADI statistics which shows NAB's volume growth in business lending to NFCs is on average 1.8x that of system (3-month annualised basis) and has in fact been gaining market share over the five months to Aug-23. We will be keen to get an updated on NAB's positioning in the business banking landscape and management expectations going forward.
It is worth noting that with NAB's results being released before CBA's update, investors may have an idea of how things are faring for Australia's largest bank from those numbers.
Another thing to look for is mortgage profitability. Goldman said:
Management noted that while there has been some improvement in mortgage profitability, largely due to the removal by most banks of cash back offers (led by CBA), margin pressure from home lending will continue in FY24 and management further noted that competition has actually been more intense in New Zealand than in Australia, highlighting new mortgages spreads in New Zealand were currently about half that of Australia.
