It was a great stock to own while it was going up, but now Commonwealth Bank of Australia (ASX: CBA) is wreaking havoc on investors' portfolios all around the country.
Commonwealth Bank's share price hit an all-time high of $96.69 in March this year and many investors had it pegged for further success in the months and years to come. A lot has changed in those four months however and such a scenario looks to be increasingly unlikely.
As at the time of writing, the shares are fetching just $74.74. They're down 1.9% for the day at a fresh 10-month low falling 22.7% since that high, and 14.2% since the beginning of the month. With 787,969 shareholders on the register as at 30 June 2015, that's a lot of wealth that has simply vanished from thin air.
Unfortunately, I don't see conditions improving anytime soon, either.
Impairment charges are likely to reverse course in the near future (if they haven't already) which will put enormous pressure on earnings; the housing market is under pressure from the financial regulators and competition for new mortgage customers is red-hot.
Throw in the combined $16 billion recently raised by the Big Four, and the potential need for another $25 billion to be raised and shareholders are looking at some significant dilution of their ownership in the banks. Should that happen, you can expect lower dividends, lower earnings per share and a poorer return on equity.
As the common disclaimer goes, 'Past performance is not indicative of future results.' They've been great for investors over the last few years, but they're not looking so great today. Indeed, investors would be far better focusing their attention elsewhere.
