Australia’s largest lender, Commonwealth Bank of Australia (CBA), experienced a significant downturn on Wednesday, with its shares closing down 10.43%. This marked the bank’s largest ever one-day percentage fall, wiping nearly A$30 billion from its market value. The decline stemmed from increased provisions for Middle East conflict risks and investor reactions to federal budget housing tax changes. The S&P/ASX200 also fell 0.46%. Commonwealth Bank of Australia is the nation’s largest lender, providing a wide array of financial services to individuals and businesses. Its offerings include mortgages, business lending, and various deposit products. As a highly-valued stock, often described as “priced to perfection,” CBA is particularly sensitive to market shifts.
Federal budget changes to housing taxation were a key driver of investor concern. Australia’s Labor government plans to limit negative gearing for residential property to new buildings and replace the 50% capital gains tax discount with tax on inflation-indexed gains. Analysts anticipate these measures could slow investor mortgage demand and weaken sales turnover of existing housing. Morgan Stanley analysts project Australian mortgage growth could slow to around 5.5% from 7.5% by 2027. Shares of other major Australian banks, including Westpac, National Australia Bank, and ANZ Group, also recorded declines.
For the three months ended March 31, CBA reported cash net profit after tax of approximately A$2.7 billion, a modest increase from A$2.6 billion a year prior, though slightly below some analyst forecasts. Despite competitive pressures, growth in mortgages, business lending, and household deposits led to a 1% gain in net interest income. However, the bank increased its collective provisions by A$200 million, revising macroeconomic forecasts and acknowledging a higher chance of a ‘downside’ economic scenario. Loan impairment charges rose to A$316 million from A$223 million, largely due to increased geopolitical and macroeconomic uncertainty. CEO Matt Comyn highlighted the Middle East conflict’s role in disrupting supply chains and contributing to global instability.
