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THE GIST
NEWS AND FEATURES
Global Philippines Fine Living
INSIGHTS
INVESTMENT STRATEGY
Economy Stocks Bonds Currencies
THE BASICS
Investment Tips Explainers Retirement
WEBINARS
2024 Mid-Year Economi Briefing, economic growth in the Philippines
2024 Mid-Year Economic Briefing: Navigating the Easing Cycle
June 21, 2024
Investing with Love
Investing with Love: A Mother’s Guide to Putting Money to Work
May 15, 2024
retirement-ss-3
Investor Series: An Introduction to Estate Planning
September 1, 2023
View All Webinars
DOWNLOADS
economy-ss-8
Inflation Update: Weak demand softens shocks
July 4, 2025 DOWNLOAD
948 x 535 px AdobeStock_433552847
Economic Updates
Monthly Economic Update: Fed cuts incoming   
June 30, 2025 DOWNLOAD
equities-3may23-2
Consensus Pricing
Consensus Pricing – June 2025
June 25, 2025 DOWNLOAD
View all Reports
Bonds Market Movements Top Picks Issuer List
  • Top Picks
  • Commonwealth Bank of Australia
Bonds

Commonwealth Bank of Australia

  • Sector: Financial Services
  • Sub Sector: Banks
  • Region: Australia
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Fundamental View

AS OF 28 Mar 2025
  • CBA 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, and has outperformed 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, while asset quality is strong.

Business Description

AS OF 28 Mar 2025
  • Originally established by the Australian government in 1911, CBA functioned for some time as Australia's central bank until the establishment of the Reserve Bank of Australia in 1959. 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 twenty years, CBA has consolidated its position as the leading bank in Australia with a 24-28% share in household deposits and lending, helped by its acquisition during the 2008 crisis of Bank of Western Australia.
  • In New Zealand it owns ASB Bank, but otherwise has been selling non-core assets, including its life insurance business.

Risk & Catalysts

AS OF 28 Mar 2025
  • CBA’s financial health is closely linked to the Australian economy, in particular retail credit quality, mainly housing loans.

  • Earnings/NIMs are under pressure from strong mortgage market and deposit competition. Business banking growth however has been stellar and highly profitable.

  • Losses on housing loans have been minimal; the low stock on the housing market has led to home prices rising from Mar-23 onwards, contrary to expectations. Low rental vacancy rates (1%) and low unemployment rates (~4%) have been very supportive of asset quality. House prices are currently going through a soggy patch, but we are not concerned.

Key Metric

AS OF 28 Mar 2025
AUD mn Y21 Y22 Y23 Y24 1H25
Return on Equity 11.7% 12.7% 14.0% 13.6% 13.8%
Total Revenues Margin 2.3% 2.1% 2.2% 2.2% 1.1%
Cost/Income 47.0% 46.3% 43.7% 45.0% 45.2%
APRA CET1 Ratio 13.1% 11.5% 12.2% 12.3% 12.2%
International CET1 Ratio 19.4% 18.6% 19.1% 19.1% 18.8%
APRA Leverage Ratio 6.0% 5.2% 5.1% 5.0% 4.9%
Impairment Charge/Avg Loans 0.1% (0.0%) 0.1% 0.1% 0.0%
Gross Impaired Loans/Total Loans 0.4% 0.3% 0.4% 0.4% 0.5%
Liquidity Coverage Ratio 129% 130% 131% 136% 127%
Net Stable Funding Ratio 129% 130% 124% 116% 116%
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CreditSight View Comment

AS OF 14 May 2025

CBA operates as a well-oiled machine in the Australian banking market. 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. Strong mortgage market and deposit competition had capped NIMs despite higher cash rates. Business banking growth has been stellar and highly profitable. Asset quality is comfortable. Its CET1 ratio though strong has declined to below ANZ’s. It is our preferred name amongst the Aussie banks. Its seniors are fair, and we prefer its shorter call and bullet Tier 2s, the NC29s and bullet 31s.

Recommendation Reviewed: May 14, 2025

Recommendation Changed: October 05, 2016

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