The Commonwealth Bank of Australia (ASX: CBA) share price is managing to hold onto some gains today, up 0.26%.
Meanwhile, the rest of the big four S&P/ASX 200 Index (ASX: XJO) have dipped into the red in early afternoon trading.
At the current share price of $100.56, CBA trades on a price-to-earnings (P/E) ratio of 18.2 times.
While that's not particularly excessive amongst high-growth shares (in fact, it would be considered low for most), it is the highest amongst the ASX 200 bank shares.
Here's how the P/E ratios for CommBank's top competitors stack up:
- Australia and New Zealand Banking Group Ltd (ASX: ANZ) trades at 10.7 times earnings
- National Australia Bank Ltd (ASX: NAB) trades at 15.4 times earnings
- Westpac Banking Corp (ASX: WBC) trades at 14.6 times earnings
So, is the CBA share price overvalued compared to its peers?
Property slowdown alert
One of the biggest factors analysts are poring over in valuing bank shares is the outlook for the Aussie housing market.
Interest rates, as we're sure you're aware, have gone from declining for a period of more than 10 years to a series of rapid hikes this year. And more rate rises are almost certainly on the near-term horizon.
While rising rates should serve to cool soaring inflation figures and help the banks' net interest margins (NIMs), higher borrowing costs will also see dwelling prices fall. Just how much of a fall depends on who you ask.
That's going to depress the demand for new mortgages in the short to mid-term. And it will put numerous borrowers under stress when the ultra-low fixed-rate mortgages they locked in at the housing peak leap 2% or more higher.
This is where the CBA share price could face stiffer headwinds than the other ASX 200 banks.
As Russel Chesler, head of investments at VanEck points out, CBA is Australia's top home lender.
And Chesler sounds a note of caution on the outlook for the CBA share price (courtesy of The Australian):
CBA continues to trade at a premium to other big banks and is arguably overvalued. As the nation's biggest home lender, it is most exposed to the property slowdown. We do not believe that the trading premium is sustainable in the long term and, at some point, CBA will be rerated.
CBA share price snapshot
CBA shares have gained 26.8% over the past five years.
Notably, the CBA share price is the only one amongst the ASX 200 bank shares that's posted a solid gain over that five-year run. Or any gain at all, to be accurate.
The NAB share price is the next best performer, down 0.4% over five years. ANZ shares have lost 19.3% over that period while Westpac trails the pack, with shares in the ASX 200 bank down 30.4%.
