Why the CBA share price is in focus today

Posted: 12 May 2021 2:19 pm

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.

Last week, Westpac (ASX: WBC), National Australia Bank (ASX: NAB) and ANZ (ASX: ANZ) together reversed nearly $1 billion in bad debt provisions, boosting their half-year profits and dividends.

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?

If you are keen to buy CBA shares, you should consider investing through an online share trading platform.

Not all platforms offer the same list of stocks. Some trading platforms offer US stocks only, so make sure to select a platform that offers ASX-listed stocks.

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Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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