Commonwealth Bank of Australia (ASX: CBA) has once again reminded the market why it trades at a premium.
Following its latest half-year result, the CBA share price rallied strongly as earnings came in ahead of expectations. That reaction doesn't surprise me. While some brokers continue to argue the stock looks expensive, I'm still holding my CBA shares and I'm comfortable doing so.
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The numbers back up the premium
In the half-year to 31 December 2025, CBA delivered cash net profit after tax of $5,445 million, up 6% on the prior corresponding period . Pre-provision profit rose 5% to $8,131 million, reflecting what I see as solid operational discipline across the core franchise.
Return on equity improved to 13.8%, which remains peer-leading. For a bank of this size, maintaining that level of profitability in a competitive lending environment is no small achievement.
Yes, margins were slightly lower and operating expenses increased due to inflation and continued investment in technology. But I actually like seeing that investment. The bank is spending over $1.2 billion on modernising its technology infrastructure and enhancing GenAI capabilities. In my view, that is how it protects its leadership position rather than slowly losing ground.
Credit quality remains a strength
One of the reasons I sleep well owning CBA shares is the quality of its balance sheet.
Loan impairment expense was $319 million, with a loan loss rate of just 6 basis points. Home loan arrears actually decreased in the half, and 87% of home loan customers are now ahead of their scheduled repayments.
To me, that speaks volumes about the resilience of both the customer base and the broader economy. The bank is also carrying a substantial provisioning buffer of around $2.8 billion above expected losses under its central scenario. That's not the behaviour of an institution cutting things fine.
Capital remains strong too, with a CET1 ratio of 12.3%, comfortably above regulatory minimums. I think that balance sheet strength deserves a premium valuation.
The dividend still matters to me
CBA declared an interim dividend of $2.35 per share, fully franked. That's up 4% on the prior corresponding period and continues the bank's track record of rewarding shareholders.
As I've written before, yield alone doesn't tell the full story. For long-term holders, yield on cost can look very different from the headline figure new investors see today. Add full franking credits into the mix and I still see CBA as a core income holding in my portfolio.
Why I'm not selling
I understand the valuation debate. On traditional metrics, CBA is not cheap. But I believe the market pays up for consistency, execution, and franchise strength. This result reinforced all three.
The bank continues to grow lending and deposits, invest in technology, maintain strong capital levels, and deliver reliable dividends. For me, that combination is exactly why I own it.
Foolish takeaway
CBA isn't a bargain share. But I believe it remains Australia's highest-quality bank.
With strong earnings, improving credit quality, and a fully franked dividend continuing to grow, I'm still happy to hold my CBA shares and let them compound over time.
