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Commonwealth Bank of Australia
- Sector: Financial Services
- Sub Sector: Banks
- Region: Australia
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Fundamental View
AS OF 05 Mar 2026CBA has a very strong franchise in Australia; it is the leader in the retail market and is making good progress in challenging NAB in business banking.
It has been the best managed of the Australian banks for many years, outperforming peers. It lost some of its luster in the latter part of the 2010s due to regulatory and compliance lapses amid charges of complacency, but has since improved into a better institution.
Its capital and liquidity position is robust, and asset quality is strong.
Business Description
AS OF 05 Mar 2026- Originally established by the Australian government in 1911, CBA functioned for some time as Australia's central bank until the establishment in 1959 of the Reserve Bank of Australia. It remained under government ownership until the early 1990s, after which it underwent a transformation from a bureaucratic public sector bank into a widely respected commercial organisation.
- Over the past couple of decades, CBA consolidated its position as the leading bank in Australia with a 24-28% share in household deposits and lending, helped by its acquisition of Bank of Western Australia during the 2008 crisis.
- In New Zealand it owns ASB Bank, but otherwise has been selling non-core assets, including its life insurance business.
Risk & Catalysts
AS OF 05 Mar 2026CBA’s financial health is closely linked to the Australian economy, in particular retail credit quality, mainly housing loans. Rate hikes, to reduce inflation resulting from growth and a tight labour market, will temper growth, but it is still expected to be higher by recent Australian standards, at 2.3% in 2026 and 2.1% in 2027; unemployment is expected to be flat at 4.4%. The bank expects one more rate hike to 4.10%, and for RBA to hold steady at that rate to end-2027.
Earnings/NIMs are under pressure from strong mortgage market and deposit competition, but the bank anticipates continued tailwinds from a higher replicating rate which would hopefully provide sufficient offset.
Business banking growth continues to be stellar and highly profitable. Overall credit growth is expected to continue at 6-8% p.a. over this and next calendar years.
Key Metric
AS OF 05 Mar 2026| AUD mn | Y23 | Y24 | Y25 | 1H26 |
|---|---|---|---|---|
| Return on Equity | 14.0% | 13.6% | 13.5% | 14.0% |
| Total Revenues Margin | 2.2% | 2.2% | 2.2% | 1.1% |
| Cost/Income | 43.7% | 45.0% | 45.7% | 45.9% |
| APRA CET1 Ratio | 12.2% | 12.3% | 12.3% | 12.3% |
| International CET1 Ratio | 19.1% | 19.1% | 20.9% | 18.3% |
| APRA Leverage Ratio | 5.1% | 5.0% | 4.7% | 4.7% |
| Impairment Charge/Avg Loans | 0.1% | 0.1% | 0.1% | 0.0% |
| Gross Impaired Loans/Total Loans | 0.8% | 1.0% | 1.1% | 1.0% |
| Liquidity Coverage Ratio | 131% | 136% | 130% | 132% |
| Net Stable Funding Ratio | 124% | 116% | 115% | 117% |
CreditSight View Comment
AS OF 11 Feb 2026CBA operates as a well-oiled machine in the Australian banking market and is our preferred name in the space. It has the leading position in mortgages and deposits, and is challenging NAB in business banking. An AUSTRAC penalty in 2018 damaged its reputation and remediation costs impacted earnings for a couple of years. The bank sold a number of its non-bank business and equity investments to simplify and focus on its core domestic businesses. It has the highest NIM amongst the Aussie banks. Business banking growth has been stellar and highly profitable. Asset quality is comfortable. Its seniors trade tight but at an acceptable level, while its Tier 2s trade fair. It had a recent dip in performance in 1Q26 but 2Q26 was strong.
Recommendation Reviewed: February 11, 2026
Recommendation Changed: October 05, 2016
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