Own CBA shares? Here's what to keep an eye on in November

October 30, 2023 03:49 PM AEDT | By Team Kalkine Media

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Own CBA shares? Here's what to keep an eye on in November — Image source: shutterstock

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October has been a challenging month for Commonwealth Bank of Australia (ASX: CBA) shares, and investors are looking ahead to November to assess potential factors that could influence the banking giant's performance. Several key events are scheduled for November that could have a significant impact on CBA shares.

Reserve Bank's Cash Rate Meeting: One notable event scheduled for November is the Reserve Bank's cash rate meeting, set to occur next week. Currently, the market is estimating a 50:50 chance of a rate hike at this meeting. A rate hike could benefit the bank's margins, but it may also introduce pressure related to bad and doubtful debts.

CBA's First Quarter Results: The most significant event for CBA shares in November will be the release of the bank's first-quarter results, expected to be disclosed on 14 November. Several aspects are worth monitoring in this update:

Cash Earnings: Goldman Sachs anticipates a decrease in cash earnings for CBA this year. While the broker has not provided a specific quarterly estimate, it is projecting a 7.3% reduction in cash earnings to $9,425 million for FY 2024. Investors should pay attention to whether CBA is tracking ahead or behind this projection during the quarter.
Business Banking Aspirations: CBA has expressed its intentions to compete aggressively in the business banking sector. It aims to challenge the sector leader, National Australia Bank Ltd (ASX:NAB). Investors will be interested in whether CBA's pursuit of business banking market share comes at the expense of its margins. Of particular importance is whether CBA's competitive approach triggers margin pressure. NAB has demonstrated its ability to coexist with CBA in this segment, maintaining strong growth in business lending to non-financial corporations (NFCs).
Mortgage Profitability: CBA's mortgage profitability is another aspect to watch. While there has been some improvement in mortgage profitability, margin pressure from home lending is expected to continue in FY24. Management noted that competition, especially in New Zealand, has been intense, with spreads for new mortgages in New Zealand about half that of Australia.

Conclusion: November holds several pivotal events for Commonwealth Bank of Australia (ASX:CBA) shares. From the Reserve Bank's cash rate meeting to the release of the bank's first-quarter results, investors will closely monitor these developments to gauge the bank's future performance and its potential impact on the market.

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