Commonwealth Bank of Australia (CBA) Share Trading Recommendation

Submitted by Craig Strzelecki on 12 February, 2007 - 18:21

Commonwealth Bank of Australia (CBA) have a Neutral 1 share trading recommendation and a price target of $50 from analyst UBS. According to the analyst wealth management should be a key driver of a strong CBA 1H07E result (14/2/07, Cash NPAT $2,154m Co format). WM is expected to contribute 18% of Group NPAT. Evidence of WM cross sell using CommSee shall be critical. The analyst expects a strong result from the Funds Management division, with NPAT of $250m (up 12.5% seq). The strength of the markets and improved fund flows should deliver strong average FUM growth. They also expect some rotation into higher margin equity funds to offset some of the underlying margin pressure. Ongoing cost saves should enable further operating leverage. They expect a solid result from the Insurance div at $141m (up 6.5%) as MOS accounting prevents the full upside being seen. They expect (1) growth in Planned Profits given strength in inforce premiums (2) improvements in general insurance sales, esp home & contents (3) GI also likely to benefit from an ongoing benign claims environment. The analyst finds the following key positives for Commonwealth Bank (CBA): (1) register short squeeze, most under-held bank (2) stabilisation in mkt shares (3) deposit spread benefit (4) WM upside (5) recent management re-jig. Issues: (1) unlikely to achieve lead status in retail bank satisfaction by 08 (2) culture change is LT. Our price target is derived from a combination of DCF, SOP and international peers.

Commonwealth Bank of Australia Limited is listed on the Australian Stock Exchange (ASX) under stock code CBA. You can view their investor website here. Ralph J Norris is the CEO of CommBank and John Schubert the Chairman. The company offers banking, financial and related services. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade CBA. Check your charts and good luck with your share trading!

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