Commonwealth Bank 3Q26 trading update: What goes up...

Research evidence excerpt

Commonwealth Bank 3Q26 trading update: What goes up...

a 14% ROE (and a div yield just ~3%),

Half Yearly Forecasts (FYE Jun)we still see downside and we retain our UW.

Adj. EPS (A$)

• 3Q26 cash NPAT of $2.7bn in line with expectations. CBA's 3Q26 trading 2025A 2026E 2027E

update was mixed with solid PPOP offset by deteriorating asset quality and a H1 3.07 3.25A 3.43

H2 3.06 3.26 3.40

softer capital position. Revenue was flat on the 1H26/QA, with NII up 1% FY 6.12 6.51 6.84

reflecting a one-off accounting gain; otherwise, lending growth offset the lower

day count. UL NIM was broadly stable excluding non-recurring tailwinds. Other Style Exposure

operating income was -2%, driven by lower trading income. Costs (ex-

restructuring and notable items) grew 1%, with headwinds from cloud

computing, software licensing and AI investment. Loan impairment expense

was $316m (12bps/GLA), in line with JPM's prior 2H26 forecast. CBA

increased its CP/CRWA +3bps to 1.38%, at the top end of its peers.

• Lower capital will limit growth. The CET1 ratio was soft at 11.6%, which we

estimate implies just under 12% for 2H26. This would mean lower growth going

forward, especially if we see some negative credit risk migration.

• Share price performance converges to peers. We view today’s share price

reaction as partly disappointment at capital/opex/credit quality trends, and partly

a catch-up vs peers, noting that anecdotally some investors had been hiding in

the stock for its defensive qualities. CBA remains the best share price performer

of the majors since the onset of the Iran conflict. Its 50% PER premium to peers

is also no lower than its 5yr average (and much higher than its 10yr avg).

• EPS changes. Our cash EPS is up 1% for FY26 on lower impairment expenses,