The earnings result may be a little over a month off but already the Commonwealth Bank is clawing its way back to its mid-May share price zenith.
Speculation about a raised dividend in the expected record $7.6 billion full-year result, to be delivered on August 14, has seen investors climb back on board one of the world’s most expensive bank stocks.
After pushing through $73 in May, CBA came under pressure from the twin central bank assault of US Federal Reserve chairman Ben Bernanke’s mutterings on turning off the stimulus tap and Glenn Stevens’s rate cut.
This time last month, CBA had dropped to $65. Since then, however, despite some wild share price swings, the trend has been unmistakably northwards to the point that it now has regained half its losses.
By midday today, it was back to $69.21 and in clear sight of breaching the $70 barrier again.
A combination of cheap cash and the clear signs of a housing recovery, particularly in the eastern states, continues to drive investor sentiment (see Alvin Pontoh's Housing recovery around the corner).
The prospect of revenue growth, as opposed to cost cutting, has lifted hopes of an improved dividend with many analysts expecting CBA to follow its peers by lifting the second-half dividend by 7.5% to $2 a share. That would see the full-year dividend rise to $3.64 which, when combined with the weaker share price, has dramatically lifted the yield prospects.
Each of the major banks has maintained a stellar run of record earnings in recent years despite anaemic growth in new mortgage lending and poor performances in business lending.
The weaker Australian dollar, which is likely to fuel corporate earnings particularly in manufacturing and service industries, should boost demand for funds.