Why the CBA share price is in focus today
Shares in the banking major have jumped nearly 60% in the past year.
Shares in Australia’s biggest lender Commonwealth Bank (ASX: CBA) are in the spotlight as the stock edges closer to its all-time high. At the time of writing, the stock was down 0.5% at $94.02 but is still within touching distance of the $95.92 peak hit in 2015.
Why investors are upbeat about the CBA share price
CBA on Wednesday reported that its third-quarter cash profit doubled from a year ago to $2.4 billion. Rapid economic recovery in the country spurred lending, allowing the bank to reverse bad debt provisions made during the COVID-19 pandemic.
It said business lending is growing at three times the industry average while home lending is tracking at the same rate as the sector.
CBA chief executive Matt Comyn said, “The bank remains well placed to support our customers and the broader community as the economic recovery from COVID-19 continues.”
Operating income increased 2% in the third quarter, mainly because of higher net interest income as volumes increased, although operating expenses also rose 2%.
The lender’s trading update comes a week after its Big Four peers outlined the rebound in their own half-year performance.
Investors have anticipated the strong numbers, reflected in CBA shares rising more than 8% over the past month. The stock was slightly lower on Wednesday, likely because some investors booked profits.
Leading market recovery
Like the rest of the banking sector, CBA also had a torrid 2020.
Last year, it had to pencil in provisions of $1.5 billion for expected loan losses stemming from COVID-19. Fortunately, that did not materialise thanks to the strong economic recovery and for the March quarter CBA reversed loan impairment expenses of $136 million.
Meanwhile, after sliding below $60 following the market crash in March 2020, CBA shares have surged nearly 60% in the last 12 months.
That’s mainly on improving economic conditions and the boom in the property market that is resulting in home prices continuing to climb in major cities like Sydney, Melbourne and Brisbane. Economists expect nearly double-digit growth in prices this year.
CBA has the largest exposure to the housing market among major banks, and is in line to reap the benefits.
Considering buying CBA shares?
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