Commonwealth Bank (CBA) shares have continued their downward trend, following a nearly 7 per cent drop in the previous session. The decline comes amid growing concerns about increased costs and net interest margin pressures. Morningstar senior equity analyst Nathan Zaia noted that while CBA’s first-quarter fiscal 2026 results indicated stable performance, the bank’s valuation appears stretched. Commonwealth Bank is one of Australia’s largest financial institutions, providing a range of banking and financial services to individuals and businesses. It is listed on the Australian Securities Exchange.
CBA reported a profit of $2.6 billion, a 1 per cent increase compared to the average of the prior two quarters. Net interest income rose by 3 per cent, despite slightly weaker margins. Zaia pointed out that operating expenses had increased due to wage and vendor inflation. However, process automation is expected to keep full-year expense growth at around 3 per cent.
Zaia cautioned that CBA shares remain materially overvalued. The bank’s forward price-to-earnings (PE) ratio is 26, with a dividend yield of 3 per cent and a price-to-book ratio of 3.8 times. This places CBA at a substantial premium compared to its peers. Zaia believes that, despite the bank’s solid fundamentals, the potential for further upside is limited given the current valuation.
As of recent trading, CBA shares were down by 1.3 per cent. This further reduces the gains made since January to 5 per cent, reflecting investor apprehension about the bank’s valuation in the current economic climate.
