It's been a torrid day for shareholders of Commonwealth Bank of Australia (ASX: CBA) who have watched their shares fall to their lowest price since January.
After having bottomed out at $88.29 earlier in the session, the stock remains heavily in the red, having fallen 2.5%, or $2.21 per share, to just $88.36.
So What: Indeed, Commonwealth Bank has been a popular target amongst investors over the last few years. While it is considered by most as being a safe bet, the bank's generous fully franked dividend has also acted as a magnet for investors in an otherwise low interest rate environment.
However, the market is now trading on lowered expectations of an official interest rate cut when the Reserve Bank of Australia meets next week, which would likely explain the bank's heavy fall today. Earlier in the month, the market had been almost certain the RBA would cut rates in May but it has become increasingly uncertain after a strong rally in iron ore prices and stronger-than-expected inflation data.
Additionally, Commonwealth Bank's major rivals, being National Australia Bank Ltd. (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) are all due to release their earnings reports next week, and investors may be nervous about what those reports will reveal.
As reported by The Australian yesterday, Westpac has warned that it believes the bank's dividend payout ratios will not increase from this point onwards, citing the need to have sufficient capital moving forward
Now What: Given the historically outstanding returns generated by each of the banks, some investors are likely to view today's setback as an excellent buying opportunity. Although the bank's shares are certainly trading at a discount compared to their prices a month ago, they are still by no means a bargain and should be avoided by long term, Foolish investors.
