Here’s why the CBA (ASX:CBA) share price has beaten the ASX 200 in the last 3 months

The company’s shares have moved higher since June…

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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.

Should you invest $1,000 in CBA right now?

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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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