The Commonwealth Bank of Australia (ASX: CBA) share price isn't having a great day of trading on the ASX boards today. CBA shares are now down by a nasty 7.13% to $100 a share at the time of writing – one of the largest drops in the CBA share price for months.
This fall in CBA shares is so large it may even be responsible for the S&P/ASX 200 Index (ASX: XJO) being in the red so far today (currently by 0.45%), given that CBA is the largest and most heavily-weighted ASX 200 share in the index.
The downward move comes after the bank reported its first-quarter earnings update to the markets this morning. As we comprehensively covered, CBA reported cash net profit after tax of $2.2 billion for the quarter, up 20% on the prior corresponding period (pcp).
Operating income was up 3% against the pcp, but so were operating expenses, which grew by 4%.
As my Fool colleague James noted this morning, "something that could weigh on the CBA share price today is its net interest margin".
Could interest margins be driving the CBA share price lower today?
In its earnings release, CBA management had this to say on that:
The Group's net interest margin was considerably lower in the quarter. Drivers of the decline were… higher liquid asset balances…, home loan price competition and switching to lower margin fixed rate loans, as well as the continued impact of a low interest rate environment.
Well, it might be this decline in net interest margins that has so spooked the markets today, as my Fool colleague cannily anticipated. But then again, CBA shares also arguably had a lot of room to move, considering the elevated price-to-earnings (P/E) ratio the shares were (and still are) trading on compared with CBA's big four banking brethren.
As it stands at the current CBA share price, Commonwealth Bank has a P/E ratio of 21.24. In contrast, National Australia Bank Ltd (ASX: NAB) is currently asking a P/E ratio of 15.41, Westpac Banking Corp (ASX: WBC) is on 16.33 and Australia and New Zealand Banking Group Ltd (ASX: ANZ) on just 13.63.
After today's steep share price drop, CBA is now trading at its lowest levels since early October. The bank is now more than 8% from the all-time high of $110.19 that we saw just earlier this month.
Even so, Commonwealth Bank shares remain up 22% year to date in 2021 so far, as well as up almost 33% over the past 12 months.
At the current CBA share price of $100.00, this ASX 200 bank has a market capitalisation of $171 billion, with a dividend yield of 3.49%.
