At time of writing, the share price of Commonwealth Bank of Australia [ASX:CBA] is up 2.69%, trading at $73.35 on the announcement of its first quarter trading update.
Australia’s largest bank saw a storm arrive on its doorstep this year in the form of COVID-19.
The CBA share price moved sharply down on the charts at the end of February.
It also put in place a mortgage freeze for those that couldn’t afford their loan repayments.
But it now looks as though the bank is finding its way out of its low:
CBA share price up on positive results announcement
As you can see above, CBA shares had 41.27% clipped off its price in February.
What followed was a series of government interventions and the mortgage freeze.
This band-aid solution helped the bank stabilise.
These are the headlines from its latest results release:
- ‘Unaudited Statutory NPAT of ~$1.9bn4,5 in the quarter
- Unaudited Cash NPAT of ~$1.8bn4,6 in the quarter, down 16% on the same period last year
- Income stable versus 2H20 quarterly average, with core volume growth helping to offset lower margins
- Credit quality indicators insulated by repayment deferrals and government support initiatives — provision coverage strengthened through forward looking adjustments for economic assumptions and expected COVID-19 impacts
- Strong balance sheet settings maintained, with deposit funding at 74%.’
Largely positive given the crisis, and perhaps a ray of hope.
But Australia’s economy remains a long-term concern.
Unlike the other Big Four, CBA is on record saying that it will keep people in their homes until late next year if they’re struggling to resume repayments.
Commonwealth Bank has about 129,000 customers who deferred their mortgages, according to September figures from the Australian Prudential Regulation Authority (APRA).
Where to from here for Commonwealth Bank?
Right now, it looks to me that the Commonwealth bank and the others of the Big Four are treading water.
According to APRA’s September data, the Big Four banks have a combined 467,000 people yet to resume mortgage repayments.
It’s also worth noting that the Reserve Bank of Australia estimates about 15% of people who deferred their repayments will likely not be able to resume them.
In the short term, the CBA share price jumped up in line with the overall All Ords [ASX:XAO].
This move was prompted by positive vaccine news, particularly Pfizer and BioNTech’s mRNA vaccine.
If the run-up can continue it may test the resistance levels of $74.52 and $76.79.
If price retraces to the downside, then the levels of $70.68 and $66.21 may become the focus.
While I am bearish on the strength of the Australian economy’s revival, CBA may continue its upwards trajectory in the short term.
Personally, the trend of cancelled or drastically-reduced dividends may continue.
At least until we see the fallout after government programs like JobKeeper and JobSeeker are removed.
None are banks, and it’s an excellent read if you are looking for alternatives.
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