The Commonwealth Bank of Australia (ASX: CBA) share price has been treading higher in recent times. In fact, shares in Australia’s largest bank have outpaced the S&P/ASX 200 Index (ASX: XJO) over the past 3 months. Correspondingly, a 3% gain versus a 0.9% lift.
At Friday’s closing bell, CBA shares increased their lead further by adding 0.89% to $101.70. On the other hand, the ASX 200 Index lost 0.43% to 7,338.3 points.
What’s driving CBA shares higher?
Investors have been buying up on the CBA share price in 2021 as the company continues to impress the market.
According to last month’s full-year results, CBA reported a 19.7% jump on statutory net profit after tax to $8,843 million. This was driven by an improvement in Australia’s economic conditions and outlook.
Cash earnings swelled 19.8% to $8,653 million, with loan impairment expenses declining 78% to $554 million.
In addition, net interest margin fell 4 basis points to 2.03% due to higher liquid assets. The impact of a low-rate environment had been largely offset by management actions. The bank achieved lower wholesale funding costs and a favourable funding mix.
It’s worth noting that CBA has conducted a $6 billion off-market share buy-back to reduce surplus capital and increase shareholder value. The capital management program will see about a 3.5% reduction of its total shares on the registry.
Basically, this means that when CBA buys back its shares, the number of shares on its registry will decrease. With a lesser amount, this effectively increases the value of each share as the revenue and profits remain the same.
Historically, when this occurs, a company’s share price tends to rise over time.
CBA share price snapshot
Over the last 12 months, CBA shares have advanced almost 60%, with year to date hovering above 20%. In comparison, the ASX 200 Index has achieved returns of 24% and 12% respectively.
CBA has a market capitalisation of roughly $179.95 billion, making it the largest company on the ASX.