Commonwealth Bank is on track to post another record profit result, but investors are questioning how the bank will plug an estimated $10 billion hole in its capital reserves.
Analysts expect the bank to unveil a $9.1 billion cash profit when it announces its full year results for 2014/15 on Wednesday, up from $8.68 billion a year ago.
But the bank's share price has been sliding for the past week as investors weigh up concerns about how much capital it will need to raise to meet new reserve requirements imposed by the Australian Prudential Regulatory Authority.
CBA is the only one of the big four banks not to announce a capital raising in the past few months.
Investment bank UBS estimates the lender may need to find another $10 billion or more to lift its reserves to a level APRA would be comfortable with.
The bank has a few options to lift its reserves: It can launch a capital raising, rein in dividends or underwrite its dividend reinvestment plan.
Of those, IG market strategist Evan Lucas said cutting dividends, or failing to raise them in line with expectations, would be the least attractive option to the bank's shareholders.
Investors have piled into the big four banks and Telstra in recent years in search of their high dividend yields, after low interest rates hurt returns from bonds and term deposits.
"Touching their dividend is going to annoy shareholders greatly," Mr Lucas told AAP.
Analysts expect the bank to lift its final dividend by seven cents to $2.25 per share.
The most likely choice is a multi-billion dollar retail and institutional entitlement offer.
However, that might not go down so well if the sharp slide in ANZ shares on Friday in response to its $2.5 billion capital raising is any guide, though it would put the issue out of the way relatively quickly.
But CBA doesn't necessarily need to raise all of its additional capital at once, so underwriting its dividend investment plan this year and in 2016 - which would have the effect of adding to the number of shares on issue - could be a less painful option.
Mr Lucas said analysts would also be looking closely at CBA's result to find out whether the amount the bank lost due to bad debts rose or fell during the second half of the year.
Sliding bad and doubtful debt charges have been a key driver of the big four bank's profit growth over the past few years but there are concerns the cycle may have turned - meaning returns from here could be weaker.
Commonwealth Bank shares closed 84 cents, or 1.03 per cent, higher at $82.14.
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