The Commonwealth Bank of Australia (ASX: CBA) is regarded as one of the best ASX shares to own amongst SMSF or retiree investors and tipping it as a ‘sell’ is widely seen as something of a sacrilegious act.
However, the top banking analysts at Goldman Sachs are doing just that on valuation grounds and as the bank’s deal to sell its life insurance business, Comminsure, to AIA Group drags on far longer than expected.
According to an August 23 note out of Goldman’s the deal to sell Comminsure was originally supposed to complete in calendar year 2018. However, delays mean it’s now expected to complete over the second half of the fiscal year ending June 30, 2020.
Offsetting this disappointment is the completed sale of CBA’s Colonial First State Global Asset Management (CFSGAM) business and the bank’s strong capital adequacy position according to the analysts.
As a result of these factors they think the bank could pay a 75 cents per share special dividend over the period to December 31 2019 and launch up to a $1 billion share buy back over the rest of the fiscal year.
This is likely to sound good to investors, but Goldman’s still feels the stock is overvalued on a price to book ratio and versus its discounted cash flow valuation.
It also believes investors are too focused on the yield and overlooking the adverse impact falling benchmark lending rates could have on CBA’s profit margins.
As a result it has a ‘sell’ rating and $74.58 price target on the shares.
Elsewhere, it’s tipping National Australia Bank Ltd (ASX: NAB) shares as a ‘conviction’ buy.
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You can find Tom on Twitter @tommyr345
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 Scott Phillips.