Are CBA shares a buy or a sell ahead of Thursday's update?

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, holding a mobile phone in his hand while thinking about something.

It’s a big week for ASX bank shares this week. We’ve already had earnings reports from two of the big four banks thus far. And owners of Commonwealth Bank of Australia (ASX: CBA) shares will get a look at a quarterly update later this week.

Yesterday, we went through the latest results from Westpac Banking Corp (ASX: WBC). These included a hike to the company’s interim dividend, as well as a new $1.5 billion share buyback program.

Today, ANZ Group Holdings Ltd (ASX: ANZ) released its own set of earnings for the six months to 31 March. The headline ended up being similar to that of Westpac, with ANZ revealing a decent hike to its interim dividend, as well as a new $2 billion share buyback.

And on Thursday, we’ll hear from CBA – the ASX’s largest bank stock by a country mile.

ASX 200 bank stock set to deliver quarterly update

Now CBA’s update on Thursday will be a quarterly update, not a full earnings report. That means we probably won’t get any new dividend or share buyback announcements, just an update on how CBA’s finances are looking as of 31 March.

CBA shares have had a pretty solid run over the past week or so. The bank is up more than 3% over the past five trading days, and today it’s back over $117 a share. Perhaps investors have taken note of a recent development out of CBA.

Today, CBA revealed that it has “been selected” by the Queensland Government to “provide whole of Government banking and payment services for a minimum term of five years”.

The bank will provide all banking and payment services to the entire Queensland Government at least until 2029, with two optional three-year term extensions on the table.

Last week, my Fool colleague James looked at some of the things that ASX broker Goldman Sachs is telling ASX investors to keep an eye on with this quarterly update. Those included the bank’s mortgage profitability, bad debts and cost controls. Goldman concluded by stating:

Overall we are of the view the key to offsetting these inflationary pressures will be the banks’ ability to deliver productivity improvements.

So should investors buy or sell CBA shares before this update gets publically released on Thursday?

CBA shares: Buy or sell?

Well, one ASX expert remains on the fence.

According to The Bull, Tom Bleakley, analyst at BW Equities, has just given CBA shares a ‘hold’ rating. Bleakley notes that while the CBA share price has risen substantially in recent months, the bank’s profits have been falling. Here’s what he said in full:

The share price of Australia’s biggest bank is off its highs above $120 in early March. But the price has risen from $96.87 on November 1 to trade at $114.195 on May 2.

Cash net profit after tax of $5.019 billion in the first half of fiscal year 2024 was down 3 per cent on the prior corresponding period. Yet the fully franked interim dividend of $2.15 a share was up 2 per cent. Investors can hold for a reliable and appealing dividend and potential capital growth.

Unfortunately for CBA bulls, Bleakley’s hold rating appears to be as good as it gets for the bank when it comes to broker recommendations.

Last month, we discussed how at least three other brokers all called ‘sell’ on CBA shares. Most of these brokers cited valuation concerns as the primary reason for their bearish outlook.

But let’s wait and see what CBA has to say on Thursday.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.