The Commonwealth Bank of Australia (ASX: CBA) share price is at almost the lowest it has been over the past year, so it's worth considering if it's a buy today.
Trading at around $75 the Commonwealth Bank share price hasn't moved much over the past five years, in November 2013 it was actually higher at $77.
The big four banks haven't looked good in the royal commission so far. Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) have both made moves to reduce their interest rates in a bid to garner a positive reaction. This may be attractive for potential loan-holders, but it reduces the net interest margin (NIM) and therefore the profit margin.
Commonwealth Bank will have to reduce its interest rate too if it's to avoid losing market share.
The bank has been seen as the safest of the four for a long time. It's certainly the biggest, but it is heavily reliant on the Australian housing market.
House prices are gently declining at the moment, with Sydney seeing the biggest falls. It isn't much, but it can significantly change how much equity people have in their homes if they have only just bought in the last year or so. This is the case for homeowners or investors.
The main problem I see for Commonwealth Bank is that there's going to be a large amount of interest-only loans coming up for renewal soon and a lot of those homeowners won't be able to pass the increased loan requirements, which could cause a knock-on effect.
The other issue is that Commonwealth Bank is already the largest bank, it's hard to see how it can generate much profit growth from here.
Foolish takeaway
As always, the best reason to buy a big four bank is its dividend yield. Commonwealth Bank's grossed-up dividend yield is currently 8.19%. However, I believe that investors need to invest smarter than that these days. Population growth is not going to be a huge earnings driver.
