Prescott Securities specialist Travis Adams anticipates that since financial planning is a relatively small aspect of its overall business, the fallout from the recent Senate inquiry and subsequent debate will not be detrimental to the bank in the long term.
“The Commonwealth Bank recently received media coverage about their financial planning division but we
don’t think this will have a great impact on the share price or earnings,” Mr Adams said.
Prescott Securities is expecting a healthy result for CBA in the upcoming reporting season well above market expectations of three per cent cash earnings growth, he said.
Term deposits are at very low rates and look likely to fall further, reducing the bank’s financing costs, he added.
“Mortgage rates have generally remained steady, helping maintain interest margins,” Mr Adams said.
“The recent cut in fixed rate home loans indicates that there is some fat in net interest margins and that CBA may be using this to increase market share.”
Mr Adams said Prescott Securities expects earnings per share across the market to be around seven to eight per cent for the next reporting season.
“Much of this growth will come from the larger quality stocks, including the banks, healthcare and non-discretionary retailers,” he said.
