Chances are you've heard about Commonwealth Bank of Australia (ASX: CBA) shares in recent months, specifically about the seemingly never-ending stream of new all-time, record highs that this ASX 200 bank stock keeps clocking.
It was only at the beginning of last year that CBA stock was sitting at around $112. Last week, those same shares broke the $180 threshold for the first time ever. Today, CBA hit another new record, this time over $183.
If you've heard about all of that, then it's also likely that you've run into some commentary suggesting that the ASX's largest bank is dangerously overvalued.
Right now, it's hard, bordering on impossible, to find an ASX expert who thinks CBA shares are anything other than woefully inflated and detached from any logical or rational valuation methodology.
I have to agree. But rather than banging on about how right these commentators are, today I thought it might be worthwhile to put CBA's valuation in some context.
To start with, let's go over the most recent profit figures for CBA and the other three major banks. We'll use each bank's full 2024 financial year, even though some banks report over different periods.
To start with, CBA, for FY2024, reported a cash net profit after tax of $9.84 billion, which incidentally was down 2% from FY2023's numbers.
For its own FY24, National Australia Bank Ltd (ASX: NAB) reported a statutory profit of $6.96 billion for the year.
Westpac Banking Corp (ASX: WBC) brought in a statutory profit of $6.99 billion.
Meanwhile, ANZ Group Holdings Ltd (ASX: ANZ) unveiled a cash profit of $6.92 billion for FY24.
How do CBA shares measure up to the other ASX 200 banks?
Now, each bank prefers to use its own metric for profits, but this provides a general ballpark figure for how much profit shareholders enjoy from each of these four banks.
As you can see, CBA is the clear market leader, while the other three majors have incredibly similar numbers for FY24.
So you would expect CBA to trade at a higher valuation than the others. Which it does.
But how much higher is truly shocking.
Right now, NAB is the second largest bank on the ASX, with a market capitalisation of $119.95 billion.
Westpac is in third place, presently worth $114.63 billion.
ANZ is in the last spot, currently valued at $88.63 billion.
But, at the current CBA share price of $182.28 (at the time of writing), CBA commands a breathtaking market capitalisation of $304.57 billion.
Yep, CBA is worth more than double its nearest rival in NAB.
But here's the clincher. If we add up the market caps of the other three major banks, we get to a figure of $323.2 billion. That means that CBA is, today, worth almost as much as the other three majors combined.
If you had any doubts that the CBA share price has gotten a bit carried away, that sobering metric should erase them.
