The Commonwealth Bank of Australia (ASX: CBA) share price has been on fire in recent months. Shares in Australia’s largest bank are up 4.8% in 2021 and 25.9% in the last 6 months. So, what’s driving the ASX bank share back towards its all-time high?
Why the CBA share price has climbed
There have been a couple of big factors at play here. The first is that many ASX bank shares were smashed in the 2020 bear market. That means we saw a share price recovery as Australia responded strongly to the coronavirus pandemic and the economic recovery began in mid to late 2020.
More economic activity is generally good news for lenders. It means that their key borrowers are likely doing better, whether in retail, healthcare, energy and the like. More money flowing in the economy means more jobs, more cash flow for borrowers and less downside risk for a bank.
Another big reason for the CBA share price gains could be the Aussie property boom. It’s estimated that the Big 4 banks control something like 80 per cent of all loans in Australia. One of the biggest areas of finance in Australia is for real estate.
Aussie housing has been going bananas in recent months, particularly on the eastern seaboard. House prices in Sydney and Melbourne have been surging, highlighted by strong CoreLogic data in March.
A strong housing market is good for lenders. It means that their underlying security on the loan is increasing, and once again, can be a good indicator of overall economic health. That means more jobs and lower chances of defaults across the board.
Overall, an effective pandemic response has helped kickstart the economy and CBA share price into gear. That means the ASX bank share is not far away from approaching the $90 per share barrier and even its all-time closing high of $95.09 in March 2015.
The CBA share price has been on fire in recent months. Shares in Australia’s largest bank are up 49.7% in the last 12 months compared to a 34.4% gain for the S&P/ASX 200 Index (ASX: XJO).