What a year Commonwealth Bank of Australia (ASX: CBA) shares (and shareholders) have had. 2025 was really a tale of two halves when it came to this ASX 200 bank stock.
The first half of the year was dominated by CBA's relentless push higher. The bank climbed over $160 a share for the first time ever early in the year. After a March slump that extended into April, CBA broke through the $170 mark in May, then hit $180 by June. Late June saw the bank reach its now reigning all-time high of $192 a share.
But ever since the middle of 2025, CBA has been drifting away from that high. By August, Commonwealth Bank was back under $170 a share, and fell under $160 just last month.
The bank has hovered around the $160 mark ever since, and looks likely to end the year at that level.
So although the current share price is almost 16% down from that June record high, it is still 4.9% above where CBA shares started 2025. This will have many investors wondering, 'Would I be mad to buy more CBA shares at $160?'
Let's talk about that proposition today.
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Is it mad to buy CBA shares at $160 each?
Well, let's look at the facts. Yesterday, CBA shares closed at $161.73 each. At this pricing, the bank was at a market capitalisation of $270.65 billion. Its price-to-earnings (P/E) ratio was 26.73, and its dividend yield was sitting at a flat 3%.
Already, we can say that a 26.73 earnings multiple is very pricey for a bank. The next-most expensive big four ASX bank is currently Westpac Banking Corp (ASX: WBC), on an earnings multiple of 19.7.
For further comparison, the largest bank in the United States, JPMorgan Chase & Co (NYSE: JPM), is currently on a P/E ratio of 16. JPMorgan is often regarded as the best-run bank in the world.
The United Kingdom's largest bank, HSBC Holdings plc (LON: HSBA), is on 16.59, while Japan's Mitsubishi UFJ Financial Group Inc (TYO: 8306) is on 15.27.
So already, CBA is still looking expensive. But we could justify a 26.7 earnings multiple if the bank has a steep growth runway in front of it.
Unfortunately, it's pretty hard to make that case. At close to $300 billion, CBA is already the largest stock on the ASX by quite a wide margin.
Yet this company is not growing fast at all. In August, the bank reported a 4% lift in cash net profits after tax to $10.25 billion for its 2025 financial year. Earlier this month, analysts at UBS pencilled in a net profit of $10.76 billion for FY2025. If that turns out to be accurate, it would represent a 4.98% rise over FY2025. Better than nothing, to be sure. But enough to justify that 26.7 earnings multiple? I would argue not.
As such, I don't think buying CBA shares at anywhere close to $160 is an idea that will result in significant wealth creation for investors in the foreseeable future. I wouldn't use the word 'mad' for politeness's sake. But then again, it's certainly not a sane price in my view.
