CBA is Too Expensive: Time to Reevaluate?

The Commonwealth Bank of Australia (ASX: CBA) is the undisputed heavyweight champion of ASX bank stocks. But in the last twelve months we’ve seen its valuation become unhinged from reality.

CBA shares have surged 60% in just over a year.

And for what?

Selling the same mortgages and skimming the same interest margins? There’s no growth story here. Just a bubble inflating before our eyes.

After the recent 1H FY25 result update, CBA shares fell over 11% in 7 trading days. While the price has since stabilised, the fall is a warning shot for CBA holders. The correction? This could just be the warm-up act.

The sharks are circling and it’s time to sit up and pay attention.

CBA’s recent share price decline wasn’t out of the blue. The meteoric rise in valuation was dizzying, bizarre and unwarranted.

To be clear, CBA is not in financial strife. Far from it.

The result was solid, with 4.7% growth in year-on-year revenue and Earnings Per Share (EPS) up 6.6% to $3.08. The Net Interest Margin (NIM) expanded 2 basis points to 2.08%. That’s the interest margin that the bank achieves between what it borrows and what it lends.