The Commonwealth Bank saw mixed upgrades from analysts over the weekend, but its sharp jump late Friday after its surprise profit upgrade ran out of steam completely yesterday and the shares ended down 5 cents at $58.05.
After the frantic $1.31 one rise late Friday to $58.10, a slowing in the share price could have been expected, but the small fall, in a market that finished in the black after spending much of the deal with losses, was quite an achievement.
Instead Westpac and the ANZ went for a run, while the NAB marked time.
Westpac jumped 2%, or 51 cents, to $26.01 and the ANZ surged 3.30%, or 74 cents, to $23.17.
In contrast, the NAB rose by just 20 cents to $27.50.
On Friday Westpac rose 12c to $25.50, ANZ 3c to $22.43 and NAB 25c to $27.30, so the two day performance of the other big three has yet to match that of the CBA, even after yesterday’s small retreat.
Investors are now waiting to see if the other three banks (all September/March balancing banks) produce upgrades in the near future, or stick to their usual timing of providing updates in February.
Some analysts said the upgrade at the CBA followed the better stockmarket performance which had a favourable impact on its funds management business, while rising interest rates have been positive for the annuities business.
Still the upgrade of 44% to interim earnings (due early next month) was still a big surprise.
CBA, the market’s second-heaviest weighted stock, said Friday it expected a 44% rise in first-half cash profit to $2.9 billion, from the $2 billion earned a year ago.
That could see net profit for the year well above $5 billion.
The prospect of a profit windfall comes at a sensitive time for the banks, which are still on the nose with customers for raising interest rates over and above the official rate rise while tightening their grip on the home lending market as competition fell away.
The Commonwealth followed Westpac late last year, raising its variable mortgage rate by 0.37%, 0.12% more than the Reserve Bank’s official rise, and only 0.08% short of Westpac’s widely criticised 0.45% rise.
The Commonwealth issued its profit upgrade minutes before the close of the Australian market.
The $58.10 hit on Friday was an all time high: this time a year ago they were at half that on fears the economy would be crunched by the global crisis.
The CBA said on Friday profit would be ”well ahead” of the consensus analyst forecast of $2.7 billion and reflected ”a continuation of the momentum” reported at its first-quarter update in November. It is scheduled to report its first-half earnings on February 10.
It said that key drivers of the result were solid revenue growth across the business, tight cost management and a drop-off in the lending losses that had played havoc with profits across the banking sector last year.
There was also a $240 million turnaround in wealth management earnings as the sharemarket rebounded. That won’t be as big a factor in the next six months.
In November the CBA said cash earnings for the three months to September had jumped 27% to $1.4 billion.
Now they have added a further $1.5 billion in the three months to December.
