Commonwealth Bank of Australia (ASX: CBA) shares are pushing higher today.
Shares in the S&P/ASX 200 Index (ASX: XJO) bank stock closed yesterday trading for $151.64. In morning trade on Tuesday, shares are swapping hands for $152.26 apiece, up 0.4%.
For some context, the ASX 200 is up 0.4% at this same time.
After a stellar 20-month run, which saw CBA shares gain 90% between October 2023 and June this year, the ASX 200 bank stock has come under selling pressure since notching its $191.40 a share record closing high on 25 June.
But with inflation in Australia on the rise again, economists are now increasingly expecting that rather than delivering two more cuts this cycle, the Reserve Bank of Australia may be forced to increase interest rates in 2026 from the current 3.60%.
That could benefit CommBank and its rivals by enabling them to improve their net interest margin (NIM). But, depending on the impact to households and businesses, it could also increase bad debts and see a reduction in borrowing.
So, what's an investor to do?
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CBA shares: Buy, hold or sell?
Despite the recent pull back in the share price, it's still hard to find analysts that believe CBA shares present good value at their current levels.
Medallion Financial Group's Stuart Bromley, for one, has a sell recommendation on Australia's biggest bank (courtesy of The Bull).
"While the CBA remains a solid business over the long term, the share price looks expensive at current levels," Bromley said.
"Recently trading on a price/earnings ratio of about 25 times and a modest dividend yield of about 3.15%, its valuation sits well above global peers," he added.
And Bromley pointed to CBA's poorly received first quarter (Q1 FY 2026) as reason for concern. He noted:
Also, the company recently suffered its worst sell-off in four years following the release of first quarter results in fiscal year 2026, which flagged higher operating costs, a weaker net interest margin (NIM) and a lower-than-expected common equity tier 1 capital ratio of 11.8%, which is still above the Australia Prudential Regulation Authority minimum of 10.25%.
But don't sell your CBA shares just yet, counters Red Leaf Securities' John Athanasiou (also in The Bull).
"CBA remains a high quality, profitable bank with strong capital ratios and a solid dividend, providing stability in a competitive sector," said Athanasiou, who has a hold recommendation on the ASX 200 bank stock.
As for the spectre of rising interest rates in Australia, he added:
Upside is limited by an expensive valuation, margin pressure and economic risks, including elevated household debt and potential loan defaults. Retail and lending growth may slow amid a cooling housing market and possible rising interest rates. Fundamentals are intact, but these headwinds suggest caution.
Athanasiou concluded, "Holding CBA provides exposure to reliable earnings and dividends. We suggest investors monitor credit conditions and market trends."
As for that passive income, CBA shares delivered $4.85 in fully franked dividends over the past 12 months.
