Commonwealth Bank of Australia (ASX: CBA) shares experienced their biggest one-day fall since listing in 1991 this week.
The CBA share price fell 10.2% after the bank released its 3Q FY26 update on Wednesday.
Yesterday, CBA shares recovered just 1.8% of that loss, closing at $156.42 apiece.
Does this present an opportunity to buy the dip?
Let's find out.
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What happened to CBA shares this week?
CBA shares plummeted on Wednesday after the bank reported an unaudited cash net profit after tax (NPAT) of $2.7 billion.
That was 1% lower than the quarterly average for 1H FY26.
The bank also revealed it had increased its bad debt provisions by $200 million due to greater geopolitical and economic risks.
CBA CEO Matt Comyn said:
We are closely monitoring the impacts of the Middle East conflict and the broader macroeconomic environment.
The Australian economy continues to demonstrate resilience, but supply chain disruptions, higher prices and interest rates are expected to weigh on household spending and business activity.
CBA's fall was large enough for the bank to lose its No. 1 position in the S&P/ASX 200 Index (ASX: XJO) to BHP Group Ltd (ASX: BHP).
At the market close yesterday, BHP had a market capitalisation of $312.6 billion compared to CBA shares at $257.16 billion.
Property investment tax changes
CBA shares investors were not only perturbed by CBA's quarterly result.
There is also now greater fear that growth in home lending could deteriorate, not only due to rising interest rates, but also substantial changes to negative gearing and capital gains tax (CGT) announced in the Federal Budget on Tuesday.
Negative gearing and the 50% discount on CGT for investments held for 12 months or more has long been blamed for incentivising investors into the residential property market.
This has raised competition and reduced affordability for first home buyers, with Federal Treasurer Jim Chalmers citing a more than 400% increase in house prices since the 50% CGT discount replaced inflation‑adjusted indexation in 1999.
Jarden analyst Matthew Wilson expects the tax changes to reduced housing credit growth by 25%.
That's a big problem for the banks because they're highly leveraged to the residential market, which is the second most expensive in the world (behind Hong Kong).
However, CBA is the most exposed because it has the largest investor loan book.
Wilson told Capital Brief:
Investors have been a very lucrative part of home loan growth for the banks with interest-only loans having wider spread, typically better asset quality through time, and therefore higher return on equity.
Jarden maintained its sell rating and a 12-month price target of $90 on CBA shares this week.
This suggests a potential 42% downside ahead.
What do other brokers think?
Morgan Stanley also discussed the risk to home lending and a slowdown in deposit growth already underway in a note this week.
The broker said there were early signs that mortgage and household deposit growth among the major banks was moderating from the strong levels of 2025.
The broker said:
We believe RBA rate hikes and higher fuel prices increase the probability that a slowdown takes hold in coming month.
Morgan Stanley said annualised home loan growth among the major banks averaged 3.7% in February.
The broker said deposit growth averaged 3.3% compared to more than 8% in 2024 and 2025.
Morgan Stanley retained its sell rating on CBA shares and shaved its price target from $131 to $130 this week.
UBS also has a target of $130 and also retained its sell rating on CBA shares. The target implies a potential 17% downside ahead.
Morgans also recommends that investors sell CBA shares. Its price target is $119.40, implying a 24% downside.
In a note, the broker said:
3Q26 earnings were below 1H26 growth expectations, both before and after the impact of topping up loan loss provisions.
Even after today's c.10% sell-off, CBA's valuation metrics remain extended and don't provide a sufficient margin of safety.
Macquarie also kept its sell rating in place and cut its 12-month price target by 2.6% to $114.
Citi and Jefferies also reiterated their sell ratings on CBA shares this week.
However, the brokers have more optimistic price targets of $140 and $142.26, respectively.
