The 1Q unaudited cash profit from Commonwealth Bank was a -9% miss versus Morgans expectation, with a significantly lower than expected net interest margin (NIM). Moreover, operating expenses were higher than expected and interest income soft, notes the analyst.
The broker maintains its Reduce rating and still feels the stock trades at an unjustified premium relative to peers. Morgans downgrades cash EPS forecasts for FY22-24 by -10.7,-9.4 and -9.2%, respectively. The target price falls to $73 from $80.
On one multiple, the broker calculates the bank is trading at a 85% premium over Westpac Bank ((WBC)), with an inferior cost outlook and a greater margin headwind for home lending.
Target price is $73.00.Current Price is $98.99. Difference: ($25.99) – (brackets indicate current price is over target). If CBA meets the Morgans target it will return approximately -36% (excluding dividends, fees and charges – negative figures indicate an expected loss).