Attention now turns to Commonwealth Bank’s FY26 result on Wednesday, with consensus expecting profit growth of around 6%. CBA remains one of the world’s most expensive major banks, trading on 26.1x forward earnings and 3.77x book value. That represents a substantial premium to domestic peers NAB (17.0x), Westpac (16.8x) and ANZ (14.8x), as well as leading global banks such as JPMorgan (14.7x) and RBC (17.0x). Both valuation measures sit more than two standard deviations above CBA’s long-term averages, highlighting just how much investors are currently prepared to pay for Australia’s premier banking franchise.
We think that premium is becoming increasingly difficult to justify on fundamentals alone. CBA clearly deserves to trade above its Australian peers given its sector-leading returns, dominant market position and technology advantages. However, its return on equity is not materially superior to high-quality global peers such as JPMorgan or RBC — acknowledging, of course, that the businesses and markets are not directly comparable.
With margin pressure building, credit costs likely to normalise and housing activity showing signs of slowing, Wednesday’s result will test whether the market remains willing to pay such an elevated multiple. We would also expect CBA to strike a relatively cautious tone on the housing and consumer outlook over the coming year.
- We are cautious on CBA ahead of Wednesday’s result. Expectations are high, the valuation leaves very little room for disappointment, and arguably no other major Australian bank has as much embedded optimism in its share price.
MM is neutral towards CBA around $174
Add To Hit List
