Was CBA's result really 'that' bad? Plus, 3 stocks we are happy to buy now

It’s not often we see CBA down around 8% in a session, taking a whopping 45 points from the index. But today was one of those rare days, as a weaker than expected first-quarter trading update and a very bullish share price leading into it broke the camel’s back.

• First-quarter cash earnings of $2.2 billion imply FY cash earnings of around $8.8 billion, which was some 4% below the current market consensus of $9.12 billion for the year.
• Management talked to margin pressure in delivering its FY21 results in August, and today’s update sang a similar tune. In addition to higher liquid asset balances, there is increasing home loan price competition – and customers (me included) are switching to lower margin fixed-rate loans, plus of course the issues created by historically low interest rates.
• The key takeaway for MM is that even CBA’s strong franchise is not immune from the elevated margin pressures that result from low rates. Remember, as MM has written numerous times, banks borrow short and lend long, so the rise in short term rates relative to longer-term rates (that is, a flattening of the yield curve) creates an issue.

In the last two weeks, we’ve had CFOs from both NAB and Westpac in, and all banks are saying similar things. Economic momentum is strong but lower rates are an issue. At MM, we think rates will go higher over time and this margin pressure should subside.

So is this a buying opportunity? Watch the video below to find out.  

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