Why the Commonwealth Bank (ASX:CBA) share price could soar 15%

The Commonwealth Bank (ASX:CBA) share price is moving higher today, but the best could still be ahead for CBA shareholders. Here's why.

Bernd Struben

Author bio Bernd Struben earned his BA in economics from the University of Michigan in 1991, with post-graduate studies in environmental economics at the University of Connecticut. Over the years he’s written about and analysed the tourism industry in the Caribbean; Europe’s commercial real estate markets; and, since moving to Australia in 2010, global and Aussie share markets. Bernd studies geopolitical and macroeconomic trends, alongside sector and company specific data, to gauge what he believes could be tomorrow's best investments. In his free time, you might find Bernd at the beach with his family or working on his next science fiction novel. Areas of expertise Australian and global share markets Macroeconomic and geopolitical trends Real estate Education Economics, University of Michigan Favorite investment quote "The four most dangerous words in investing are: 'This time it's different." — Sir John Templeton

Published April 13, 2021 12:58 pm AEST

The Commonwealth Bank of Australia (ASX: CBA) share price is trending higher in early afternoon trade, up 0.42%.

But this could be just the tip of the share-price-gains iceberg for CBA and the rest of the big four banks over the coming six months.

CBA share price represented by bunch of yellow balloons flying high — Image source: Getty Images

Could the banking giant's value surge over the next 6 months?

The Commonwealth Bank share price is in the spotlight today, along with the wider ASX banking sector.

This comes following a price forecast from David Cassidy, head of Australian equity strategy at Wilsons Advisory. Cassidy forecasts that the ASX banks could see significant more share price upside over the coming six months as investors continue to rotate into beaten-down value shares.

As the Australian Financial Review reports, Cassidy believes that, if this scenario remains in play, bank shares could gain 15% from their current levels, for a 20% annual gain.

Atop the rapid economic recovery underway in Australia, which should lead to earnings upgrades and higher dividend yields, Cassidy believes banks have "over-provided for the risks of COVID-19" and that "these provisions will likely be wound back in the next year".

Although Wilsons is "avoiding Commonwealth Bank of Australia on relative valuation grounds", Cassidy is bullish on the banking sector, saying:

The worst is behind the banks from a regulatory perspective… We believe there is still more runway for the banks, with an improved economic and regulatory backdrop than pre-COVID-19.

Cassidy added, "Over the next 6 months, investors will be asking more from bank management teams around strategic initiatives to grow earnings in a post-COVID-19, post-royal commission environment."

Commonwealth Bank share price snapshot

The Commonwealth Bank share price is up by around 38% over the past 12 months, outpacing the 27% gain posted by the S&P/ASX 200 Index (ASX: XJO).

Year to date, CBA shares have gained around 4%. The ASX 200 listed bank pays a dividend yield of 2.9%, fully franked.

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