Why the CBA (ASX:CBA) share price jumped 23% in 2021

CBA shares were on form in 2021…

| More on:
high, climbing, record high

Image Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Commonwealth Bank of Australia (ASX: CBA) share price was on form in 2021 despite an end of year blip.

Over the 12 months, the banking giant’s shares rose by a sizeable 23%.

Why did the CBA share price charge higher in 2021?

Investors were buying CBA and other bank shares last year after they returned to form in FY 2021 following a difficult time a year earlier because of the pandemic.

For example, for the 12 months ended 30 June, Australia’s largest bank revealed a 19.8% increase in cash earnings to $8,653 million. This was notably better than the analyst consensus estimate of $8,464 million.

This strong result was driven by growth across business lending, home lending, and household deposits. CBA revealed that business lending grew over 3x system, home lending was 1.2x system, and household deposits grew 1.2x system.

In addition, the bank finished the period with a very strong balance sheet and capital position. This allowed CBA to declare a fully franked final dividend of $2.00 per share, bringing its full year dividend to $3.50 per share. This was a 17% increase year on year.

But it got better for shareholders. In addition to the final dividend, the bank announced a $6 billion off-market share buyback. Once again, this was also ahead of the market’s expectations.

Commonwealth Bank’s Chief Executive Officer, Matt Comyn, commented at the time: “Strategic divestments have generated $6.2 billion in excess capital since 2018. Today we have announced an off-market buy-back of up to $6 billion of CBA shares as the most efficient and appropriate way to commence the return of surplus capital, as shareholders will benefit from a lower share count that will support return on equity and dividends per share.”

What’s next in 2022?

Opinion remains divided on the CBA share price at the current level.

In one corner you have the bears at Morgans that believe it could fall to $73.00. In the other corner, there are the bulls at Bell Potter with their buy rating and $111.00 price target.

Time will tell which broker makes the right call on the CBA share price.

Motley Fool contributor James Mickleboro 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.

More on Bank Shares

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Bank Shares

Why did the Westpac share price crash 18% in June?

Westpac shares were sold off last month. Here's why...

Read more »

A little boy surrounded by green grass and trees looks up at the sky, waiting for rain or sunshine.
Bank Shares

Could the CBA share price turn over a new leaf in July?

Here's what brokers are thinking about the big four ASX bank.

Read more »

a man sitting at a computer at a desk has a look of anguish and trepidation on his face as he opens his eyes wide and made an aargh type expression with his mouth as his hair stands on end and his tie also stands on end with one part over each shoulder in what is supposed to be a humorous picture of something in a panic.
Bank Shares

Why did the CBA share price crash 13% in June?

CBA shares were sold off in June. Here's why...

Read more »

Four businessmen in suits pose together in a martial arts style pose as if ready to engage in competition or spring into a fight.
Bank Shares

Why this fundie favours NAB and Westpac shares out of the big four

Two of the big ASX banks are preferred over the others.

Read more »

red percentage sign with man looking up which represents high interest rates
Bank Shares

Westpac tips another big RBA rate hike next week

Is the RBA going to raise rates again next week? Westpac thinks it will...

Read more »

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Bank Shares

Why the CBA share price is slipping lower today

ASX financials continue to struggle in June.

Read more »

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Bank Shares

Can investors bank on the NAB share price in July?

After a tough June, we consider if things can get better for the big four ASX bank.

Read more »

a group of people stand examining a large glowing cystral ball held in the hands of one of the group members while the others regard it with various expressions of wonder, curiousity and scepticism.
Bank Shares

What’s in store for the ANZ share price in July?

Investors will be hoping for a change in fortune for this ASX bank share.

Read more »