Investors are betting the Commonwealth Bank will unveil a multibillion-dollar share buyback as profits receive a boost from improving bad debts and lenders return excess capital to shareholders.

Despite the growing economic cost being inflicted by lockdowns in major Australian cities, CBA chief executive Matt Comyn is widely expected to announce some form of capital management when he delivers the bank’s full-year profits on Wednesday.

Analysts expect CBA to deliver full-year cash earnings of about $8.6 billion, which would be 18 per cent more than last year’s pandemic-affected $7.3 billion profit. The market also expects a final dividend of $1.89, according to figures quoted by Credit Suisse, up from 98¢ a share last year, when dividends were capped by the regulator.

The country’s biggest bank has been expanding its share in the home loan and business loan markets, and all banks have posted much lower bad debt charges than feared at the height of last year.

At its latest quarter CBA had amassed more than $10 billion in surplus capital, and there is an expectation the bank will join ANZ Bank and National Australia Bank in announcing some form of capital management, probably a share buyback.

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Even so, some analysts think the bank may temper the size of its buyback because of the uncertainty caused by the latest COVID-19 outbreaks, which are threatening to derail the economic recovery.

Citi analyst Brendan Sproules said the re-emergence of COVID-19 was a conundrum for bank boards because it complicated what had until recently been an “unambiguous” recovery. Even so, he believed buybacks would continue, as the experience of last year’s lockdowns meant there was much less uncertainty than in 2020.

“We expect CBA to lead the sector with $5 billion off-market buyback announced at these results. However, a more modest $2 billion on-market buyback from CBA is a scenario that can’t be ignored given the politics at play,” Mr Sproules said.