Why the CBA (ASX:CBA) share price is at record highs

The big 4 banks have gone from dogs to darlings, and CBA leads the pack.

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The Commonwealth Bank of Australia (ASX: CBA) share price is up 1.3% in late afternoon trade. CBA is currently trading for $102.54 per share.

It was only last Friday, 28 May, that the CBA share price closed higher than $100 for the first time.

That psychological level didn’t last long. CommBank closed lower on the first 2 days of this week, with the CBA share price at $99.46 by Tuesday’s closing bell.

The tail end of this week has been a different story, with CommBank closing in the green the past 3 days. Assuming today’s gains hold, the CBA share price looks set to close at a new record high today.

CBA in the news

Over the past 3 months, CBA has been the best performing of the big 4 banks. And a growing chorus of analysts expect that CBA will be giving some of its profits back to shareholders by ramping up dividends.

Matthew Haupt, portfolio manager at Wilson Asset Management, calls CBA “the best bank in Australia.” As Reuters reports, Wilson Asset Management has a position in all the big 4 banks.

According to Haupt

[CBA] is absolutely flush with capital so they are in a great place to be able to return capital to shareholders… Probably around August, they’ll come out with a market buyback with a large franking credit portion. They should be leading the charge in capital management.

CommBank has roughly $11.5 billion more capital than it’s required to hold under the 10.5% core capital regulations.

That staggering sum has analysts at Morgan Stanley forecasting CBA will raise its dividend payment when it reports on its 2021 financial year earnings on 11 August. The broker also believes CommBank will make an off-market share buyback in the range of $5–5.5 billion.

CBA share price snapshot

The best performing of the big 4 banks in recent months, CommBank shares are up 52% over the past 12 months. By comparison, the S&P/ASX 200 Index (ASX: XJO) has gained 22% in that same time.

Year-to-date the CBA share price is up 22%.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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