Morgans expects the upcoming round of major bank trading updates, and one result for the Commonwealth Bank ((CBA)), to likely increase upside risk to earnings and dividend forecasts for FY21.
While the broker has the lowest FY21 credit impairment charge forecast, by comparison to other brokers, the analysts believe even its own forecasts are looking increasingly conservative.
Morgans adopts this view after reviewing recent APRA data showing loan repayment deferrals have declined significantly since September 2020. Total deferrals at the end of December 2020 were 1.9% of total loans.
The Westpac Bank’s first quarter trading update is on the 17th of February and Morgans lifts the bank to the most preffered of the big four banks due to the excessive asset quality damage already priced in.
The Hold rating is maintained and the target price is increased to $25.50 from $23.50.
Sector: Banks.
Target price is $25.50.Current Price is $21.71. Difference: $3.79 – (brackets indicate current price is over target). If WBC meets the Morgans target it will return approximately 15% (excluding dividends, fees and charges – negative figures indicate an expected loss).
