Whenever a blue-chip falls heavily, I get excited because of how much better value it may be after the valuation decline. At the time of writing, the Commonwealth Bank of Australia (ASX: CBA) share price has dropped by more than 10% in the last six months, as the chart below shows.
For a business the size of CBA, we're talking about a decline of the market capitalisation that's in the tens of billions of dollars.
This is a good time to ask whether it's a good time to invest in the ASX bank share for 2026 and beyond.
Image source: Getty Images
Positives about the CBA share price
There are two main inputs that decide what a valuation is for a blue-chip. There's how much earnings per share (EPS) it generates and what price/earnings (P/E) ratio it trades at.
Analysts are usually fairly good at estimating what earnings a business is going to achieve in the next financial year, but it's much harder to know what the P/E ratio the market will be willing to pay. Market confidence about a business or the whole market can change quite substantially.
From an outside perspective, the CBA share price reduction has moved the bank's valuation towards a healthier and more sustainable footing.
The loan growth of the bank is impressive, considering the huge loan balance CBA already has. In the three months to 30 September 2025, the ASX bank share reported year-over-year balance growth of 10.4% for business lending, 9.5% growth for household deposits and 6.1% growth for home lending.
I think it's impressive that the bank reported proprietary home loans accounted for 68% of new business flows for the quarter. That's stronger than its main banking competitors, giving the bank a competitive advantage (economic moat) of winning new loans rather than just competing on price via brokers.
The final positive I'll highlight is the bank's payout, CBA's dividend has been resilient since 2020 and it's widely predicted by analysts to continue seeing payout growth in FY26.
Negatives
While the bank has noticeably fallen, it's still trading on a forward P/E ratio that's in the mid-20s. That seems high considering its quarterly cash profit in the first quarter of FY26 was around $2.6 billion, only 1% higher than the quarterly average of the second half of FY25.
While lending growth was strong, as I mentioned above, there were headwinds that limited profit growth, including wages and IT vendor inflation. Additionally, lending margins came under pressure from deposit switching, competition and the lower cash rate environment, with three RBA rate cuts in 2025.
Also, competition is a strong headwind against faster profit growth. Businesses like Macquarie Group Ltd (ASX: MQG) and ANZ Group Holdings Ltd (ASX: ANZ) would love to grow their market share at the expense of CBA.
The final negative I'll note is that CBA's dividend yield is not exactly huge. Its FY25 payout translates into a grossed-up dividend yield of 4.3%, including franking credits, at the time of writing. There are plenty of other names with a better yield.
Is the CBA share price a buy?
Analysts are not convinced about the bank right now. According to CMC Markets, out of nine ratings on the ASX bank share, all nine are a sell. The average price target suggests a possible fall of more than 20% over the next year, which doesn't bode well.
It's a strong bank, but it doesn't have the earnings growth potential to justify investing for capital growth, while the passive income isn't groundbreaking. Other ASX shares may be capable of stronger returns, in my view.
