CBA, a better than expected result. But not one broker says it's a buy and it nudges up back to record high territory

Australia's biggest bank, CBA, and the largest company on the ASX, raised their dividend after delivering a $9.84 billion profit. Despite its cash profit falling over 2% and its net interest margin declining, overall, their results met average analysts' estimates, which is why we saw a positive reaction in its shares, pushing them back up towards record-high territory.

· This resilience was reflected in three key areas of the bank :Retail banking services profits rose +3.8% y/y to A$5.36 billion. Institutional banking and markets cash profit increased by +4.7% y/y to A$1.10 billion. Business Banking cash profit grew by +4.1% y/y to A$3.77 billion. So, despite insolvencies in Australia being at record highs, its loan impairment dropped, indicating that things are not as bad as feared.

· CBA's closely watched net interest margin (NIM) fell to 1.99%, down from last year's 2.07%. However, the key metric slightly beat the estimate of 1.98% NIM, which is being viewed as a win by sell-side analysts. This is partly because impairments fell (due to rising house prices and lower losses within consumer finance).

· In terms of CBA's net income (or profit), it fell 6% y/y to A$9.39 billion, missing the A$9.45 billion estimate.

· The reason for the miss and the larger-than-expected drop - is that costs rose more than anticipated, and CBA lost more market share than expected. Although CBA noted that competition is increasing, so too is deposit switching. However, the good news is that CBA sees things improving in the second half. As for its costs, operating expenses on a cash basis rose by +3% y/y to A$12.22 billion, just shy of the A$12.23 billion estimate.

· As for CBA's outlook, it sees margins stabilizing in the second half of the year for a couple of reasons:

o Firstly, on a micro level, deposit funding has strengthened to 77% of total funding (stable retail, business, and institutional deposits).

o Secondly, and importantly, from a bigger-picture perspective, unemployment is low. CBA sees continued investment in both the private and public sectors, with exports supporting national income. While higher interest rates are slowing the economy and moderating inflation, "Australia remains well-positioned, but downside risks continue around productivity, housing affordability, as well as ongoing global uncertainty.

· CBA shares are now just a whisker away (2.6%) from its record highs, (it has a forward PE of 23 times earnings) and a forward gross dividend of 4.96% yield - to many its a buying opportunity for a A$223.9 B company that sees super fund and ETF buying each quarter - but not one broker has it as a buy.