Commonwealth Bank of Australia shares fall on broker downgrade

The Commonwealth Bank of Australia (ASX: CBA) share price has had a disappointing start to the week and in morning trade finds itself deep in the red.

At the time of writing the shares of Australia’s largest bank are down 1% to $79.00.

Why are its shares lower today?

With no news out of the bank, today’s decline is likely to be related to a broker note out of Citi this morning.

According to the note, Citi has downgraded CommBank’s shares to a sell rating from neutral. Furthermore, the broker has reduced its target price on the bank’s shares all the way down to $72.00, which implies potential downside of almost 9% for its shares over the next 12 months.

Citi’s analysts appear to believe that slowing balance sheet momentum and rising costs will lead to a period of underperformance for the bank and its shares.

The shares of big four rivals Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd. (ASX: NAB), and Australia and New Zealand Banking Group (ASX: ANZ) have also tumbled lower on the back of CommBank’s broker downgrade.

Should you sell?

Whilst I wouldn’t necessarily be in a rush to sell my shares if I were a shareholder due to its generous dividend, I equally wouldn’t be rushing to invest in the bank unless its shares were a fair bit cheaper.

I expect CommBank’s shares to be largely flat this year due to it coming under scrutiny from the Royal Commission and the seemingly inevitable cooling of Australia’s housing market.

If its shares fell down to the $72.00 level that Citi has predicted, I would be fighting to get hold of shares. At this level I think it would offer investors a great mix of both value and income. But until then, I plan to stay on the sidelines.

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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