Is the CBA share price a buy after the bank's FY22 results?

Is now a good time to buy CBA's shares?

| More on:
A woman in a bright yellow jumper looks happily at her yellow piggy bank representing bank dividends and in particular the CBA dividend

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 out of form on Wednesday.

The banking giant's shares ended the day 0.3% lower at $101.00.

Why did the CBA share price edge lower?

Investors were selling down the CBA share price despite the banking giant delivering a full year result a touch ahead of expectations.

For example, according to a note out of Goldman Sachs, the bank's earnings were 2% ahead of its expectations thanks to better than expected bad and doubtful debts. In addition, the CBA final dividend was slightly ahead of the broker's expectations and its CET1 ratio was 8 basis points ahead of estimates at 11.5%.

Judging by the CBA share price performance, it seems as though the market was expecting an even stronger result. And with that not coming, they decided to hit the sell button.

Is it time to invest?

Unfortunately, despite Australia's largest bank outperforming its expectations, Goldman Sachs hasn't seen enough to change its recommendation.

It continues to rate the bank as a sell with an improved price target of $86.86.

Based on the current CBA share price, this implies potential downside of 14% for investors over the next 12 months.

Why is Goldman bearish?

While Goldman acknowledges that CBA is a high quality bank and that its fundamentals remain strong, it just can't justify the premium valuation of the CBA share price.

It explained:

Overall we reiterate our Sell rating, given: i) while operating trends remain strong with volume growth best amongst the major bank peer group (3 month annualised 0.9x system vs. NAB also at 0.9x, WBC 0.7x, ANZ 0.6x), and ii) CBA has the best leverage of the major banks to higher rates, iii) it is also more exposed to sector wide headwinds such as intense mortgage price competition, as well as further potential macro downside that appears likely to more adversely impact the household this cycle. Overall, we do not believe its fundamentals justify the 56% 12-mo forward PER premium it is currently trading on versus peers, compared to the 19% historic average.

More on Bank Shares

happy woman throws arms in the air
Bank Shares

NAB shares hit 52-week high on first-quarter earnings beat

NAB appears on track to at least deliver on first-half expectations.

Read more »

A man in a suit face palms at the downturn happening with shares today.
Bank Shares

Why is the CBA share price sinking on Wednesday?

What's going on with this banking giant's shares today?

Read more »

A young man sits at his desk working on his laptop with a big smile on his face due to his ASX shares going up and in particular the Computershare share price
Earnings Results

NAB share price on watch following Q1 update

NAB has released its quarterly update. How did it perform?

Read more »

A surprised man sits at his desk in his study staring at his computer screen with his hands up.
Bank Shares

ANZ shares tumble despite Suncorp Bank takeover approval

The Australian Competition Tribunal has finally given the deal the thumbs up.

Read more »

A male sharemarket analyst sits at his desk looking intently at his laptop with two other monitors next to him showing stock price movements
Bank Shares

Are Westpac shares a buy following the bank's results?

Is now a good time to snap up this banking giant's shares?

Read more »

A young man sits at his desk with a laptop and documents with a gas heater visible behind him as though he is considering the information in front of him. about the BHP share price
Bank Shares

High rates, falling profits: Why are ASX bank shares losing out this reporting season?

What’s happening to banks this reporting season?

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Bank Shares

How will ANZ shares react to a big week of ASX news?

ANZ shares got some good news today, but might get even better news tomorrow.

Read more »

Young investor sits at desk looking happy after discovering Westpac's dividend reinvestment plan
Bank Shares

Why are Westpac shares leaping ahead of rival ASX 200 bank stocks on Monday?

ASX 200 investors have been poring over Westpac’s quarterly results today.

Read more »