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

CBA shares were sold off in June. Here’s why…

| More on:
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.

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

Key points

  • CBA's shares were sold off in June
  • Australia's oldest bank saw its shares lose over 13% of their value during the month
  • There were few catalysts for this underperformance such as rate hikes and bearish broker notes

After a comparatively decent showing in May, the Commonwealth Bank of Australia (ASX: CBA) share price gave back its gains and more in June.

During the month, Australia’s oldest bank saw its shares lose 13.4% of their value.

This compares unfavourably to the ASX 200 index and its 8.9% decline in June.

Why did the CBA share price drop in June?

The CBA share price was sold off early on in the month after the Reserve Bank of Australia shocked the market with a far more aggressive rate hike than the market was expecting.

This sparked fears that the central bank’s attempts to tame inflation could bring about a recession and lead to a rise in bad debts.

It wasn’t just the CBA share price that tumbled on the news. All the big four banks dropped and ultimately posted sizeable monthly declines.

What else?

Also putting pressure on the CBA share price was a broker note out of Morgan Stanley last month.

Due to concerns over a weaker housing and mortgage market, its analysts retained their underweight rating and slashed their price target on the bank’s shares from $91.00 down to $79.00.

Morgan Stanley points out that Australian mortgage growth has slowed meaningfully during previous quick and aggressive RBA rate hikes. Unfortunately, this time around the broker suspects that things could be even worse.

“In this cycle, we believe the slowdown will be greater given household leverage is higher than in prior cycles, mortgage rates are starting from a lower base, and cash rate hikes are likely to be larger,” the broker said.

Elsewhere, the team at Citi retained its sell rating and $90.75 price target. Citi warned that the valuation gap between CBA and the rest of the big four could narrow.

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 Scott Phillips.

More on Bank Shares

Woman sitting at a desk shrugs.
Bank Shares

CBA share price slides today despite an 11% FY22 earnings leap

CommBank's net interest margins (NIM) declined year on year, which could be contributing to today's selling.

Read more »

A couple sits in their lounge room with a large piggy bank on the coffee table. They smile while the male partner feeds some money into the slot while the female partner looks on with an iPad style device in her hands as though they are budgeting.
Bank Shares

Here’s everything you need to know about the latest CBA dividend

How big is the latest dividend from CBA?

Read more »

A young woman wearing glasses and a red top looks at her laptop happily, watching, waiting, on good results.
Bank Shares

Own Westpac shares? Here’s when the ASX 200 bank will release its FY22 earnings

Investors have a while to wait before learning of the bank's FY22 performance.

Read more »

A male ASX investor on the street wearing a grey suit clenches his fist and yells yes after seeing on his ipad that the Paladin share price is going up again today
Bank Shares

How to play ASX bank shares for dividends this reporting season: expert

Plus the three best bank stocks to buy into right now for both income and growth.

Read more »

A woman wearing yellow smiles and drinks coffee while on laptop.
Bank Shares

CBA share price on watch after FY22 cash earnings jump to $9.6bn

Here's how CBA performed in FY 2022...

Read more »

An unhappy man in a suit sits at his desk with his arms crossed staring at his laptop screen as the PointsBet share price falls
Bank Shares

NAB share price lags other ASX 200 banks following quarterly update

The NAB share price is slipping as the market digests the bank's earnings for the June quarter.

Read more »

A woman looks questioning as she puts a coin into a piggy bank.
Earnings Results

NAB share price in focus following $1.8bn Q3 cash profit and cost growth revision

NAB's shares will be on watch today. Here's why...

Read more »

Business man at desk looking out window with his arms behind his head at a view of the city and stock trends overlay.
Bank Shares

ANZ share price unfazed amid bank’s latest move to finance decarbonisation

Here's more on the bank's latest push to fund net zero.

Read more »