CBA is now worth over $300 billion, but the experts are cautious
Commonwealth Bank this week hit a new milestone when its market value broke through $300 billion, continuing to defy sceptical analysts who have long struggled to make sense of the gravity-defying rise in the banking giant's shares.
CBA shares are up almost 47 per cent in the past year, and the bank's market value is on par with global powerhouses such as Wall Street titan Goldman Sachs. CBA's market value is far greater than the combined value of its two largest rivals: Westpac and National Australia Bank.
The Sydney-based bank has also led a powerful sector-wide rally in bank shares: Citi analysts say banks have outperformed the ASX 200 by 27 per cent since the start of 2024.
But despite the bank's bumper share price, which ticked up to $181.34 on Thursday, some analysts say they see a more subdued outlook for bank shares, pointing to pressure on profit margins from the expected fall in interest rates.
Others are cautioning that after the surge in bank shares, investors should be aware of the possibility of a 'rotation' towards miners, the other major sector of the ASX.
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Morgan Stanley analyst Richard Wiles on Thursday argued there were 'downside risks' to major bank share prices, saying various forces that supported the sector in 2024 were starting to fade.
Wiles said that in particular, net interest margins (banks' funding costs compared with what they charge for loans) appeared to have peaked, while the outlook for dividends and buybacks was also more subdued.
Wiles said the CBA's price-to-earnings multiple – a key measure of a stock's valuation – had hit 28 times, and this was 'very difficult to justify' given the outlook for CBA profit growth.
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