Commonwealth Bank of Australia (ASX: CBA) shares are a popular option for Aussie investors.
But with the banking giant's shares trading just a whisker away from a new record high, are they a good option?
To find out, let's take a look at what one leading broker is saying about Australia's largest bank following its third quarter update.
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What is being said about its update?
According to a note out of Macquarie, its analysts were relatively impressed with the bank's performance during the quarter.
The broker described the result as "solid" and highlighted that its earnings were a touch ahead of expectations thanks to a combination of volume growth and stable margins. It said:
CBA delivered a solid 3Q25 trading update. Pre-provision earnings were marginally ahead of expectations, rising ~1% QoQ, underpinned by stable margins and robust volume growth. We forecast CBA's pre-provision profits to rise ~2% in 2H25. Margins were flat-to-higher with one-off benefits from treasury and the timing lag on mortgages.
This has ultimately led to Macquarie lifting its dividend expectations for CBA in the near term, which is good news for shareholders. It adds:
Excluding these, margins were stable at ~2.08% with continued deposit competition offset by replicating portfolio tailwinds. Capital was better than expected, with full period CET1 likely ~12.3%. Given CBA's stronger capital position than peers, we have increased CBA's dividend in-line with earnings.
What else?
Macquarie believes that this result demonstrates that Commonwealth Bank is best placed to weather low interest rates compared to other bank shares. The broker explains:
Similar to peers, we have reviewed our estimate of sensitivity of margins to lower rates. We estimate CBA will face a 9bps headwind from unhedged deposits and mix shift (vs peers 5-8bps) to FY27, but this will be offset by 10bps of tailwinds from the replicating portfolio (vs peers 1-6bps). The combined effect leaves them with a 1bp tailwind, well ahead of WBC (-7bps) and marginally better than ANZ/NAB (0bps), despite facing more downside to deposit margins.
Are Commonwealth Bank shares good value?
While it may be the highest quality bank out there, that isn't enough for Macquarie to recommend it as a buy.
The note reveals that the broker has reaffirmed its underperform rating and $105.00 price target on the bank's shares.
Based on its current share price of $168.31, this implies massive potential downside of approximately 38% for Commonwealth Bank shares over the next 12 months. The broker concludes:
Despite a consistent and reasonably positive trading update, CBA remains expensive, trading at a ~26x FY25E P/E and a ~45-90% premium to peers. While we appreciate de-rating lacks near-term catalysts, we do not think the current valuation is fundamentally justified. Maintain Underperform.
