Is the Commonwealth Bank of Australia (ASX: CBA) share price a buy with everything that's going on with the coronavirus issues?
The CBA share price has fallen by 32% since the declines began. Falling by a third sounds painful, but it hasn't been as bad as some of the other banks.
The Westpac Banking Corp (ASX: WBC) share price has dropped 39%.
The National Australia Bank Ltd (ASX: NAB) share price has fallen by 41%.
The Australia and New Zealand Banking Group (ASX: ANZ) share price has declined by 40%.
CBA's share price decline doesn't look so bad does it?
Don't forget that CBA is/was one of the most capitalised businesses in the world before the coronavirus hit the world.
What's next for the CBA?
CBA is fortunate in that it is more focused on household lending than banks like NAB and ANZ. It's households that are receiving the biggest amount of support through jobkeeper and an increased jobseeker.
Time will tell how much the coronavirus punishes CBA's profit. There are already a number of things that are going to cause issues.
The longest-term issue could be the record low interest rates. Banks in Europe have had a tough time earning good returns over the past decade with very low interest rates. Australian banks could face similar issues, though it seems the RBA won't go to 0% (or below).
Payment holidays are both a good thing and a bad thing for the bank. It may mean being able to avoid even more bad debts. It may mean being able to earn interest and fees on those loans. But the payments aren't actually being paid and so CBA can't really make cash dividend payments to shareholders. And APRA wants banks to reduce dividends.
It's impossible to say what's going to happen next for the CBA share price. A lot depends on how Australia's economy goes over the next six months.
Is the CBA share price a buy?
I prefer the idea of CBA compared to the other three major banks. But I wouldn't buy it for the dividend – there's almost definitely going to be a cut.
If you think the banks have seen the worst of the price falls already, they could be worth buying. But I think there could be a bit more pain when the other three big banks report over the next month.
