A desperate CBA board has been able to keep shareholders happy after a year that was full tumult, board and senior executive change, a restructure, disciplinary action from regulators, not to mention being criticised in the Hayne Royal Commission.
CBA shareholders will get an unchanged full-year dividend of $4.31 a share despite earnings falling for the year to June 30 under the twin weight of the fallout from the royal commission and weaker lending, especially in housing.
Morgans believes stimulus initiatives announced by APRA (Australian Prudential Regulatory Authority), for an additional capital add-on of $500m for operational risk, to be applied until the banks have completed their planned remediation, will de-risk the earnings outlook for the sector.
Citi observes Commonwealth Bank has utilised the March quarter to accelerate the recognition of customer remediation across wealth management advice & products and has now dealt with key issues, so a top up in future looks less likely.
Following a broader market re-rating, Macquarie finds the bank sector looking increasingly attractive on a relative basis. The sector is offering healthy dividend yields and supportive relative valuations.
First quarter cash profit was in line with Morgan Stanley's estimates. The margin was lower than expected while housing loans were slightly ahead of forecasts. The broker notes credit quality remains sound.