Commonwealth Bank of Australia (ASX: CBA) shares are currently trading around $150.83 as we approach the end of the month.
Here's what I think of the big four bank's shares as we head into October.
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What does the outlook look like?
One of the things I like about CBA is the strength of the underlying business.
The bank has leading positions across home lending and deposits, a huge customer base, and a strong digital offering. Those advantages have helped it generate consistently strong returns and make it the major bank I would most want to own.
The earnings outlook is steady rather than spectacular.
CBA generated earnings per share (EPS) of $6.58 in FY26. Consensus estimates point to this increasing to $6.67 in FY27 and $6.86 in FY28.
That is only modest growth, but I think there is value in the predictability of those earnings, particularly when combined with CBA's dividend.
Dividends per share are expected to rise from $5.05 in FY26 to $5.15 in FY27 and $5.30 in FY28.
At today's share price, the FY27 forecast implies a dividend yield of around 3.4%, before considering any franking benefits.
What about interest rates?
Interest rates could become an increasingly important part of the story in October.
The Reserve Bank of Australia is widely expected to raise the cash rate this week, with the possibility of another increase later in the year.
Higher rates can have mixed implications for banks.
They can provide some support for margins depending on how quickly lending and deposit rates move. At the same time, higher borrowing costs can put additional pressure on households and potentially weigh on credit growth.
For CBA, I think its large deposit base and strong position in Australian banking leave it relatively well placed to navigate that environment.
I would still watch how higher rates affect mortgage customers and competition across the sector, particularly if monetary policy remains restrictive for longer.
Is the valuation too high?
This is where the decision becomes more difficult.
At $150.83, CBA shares are trading on a PE ratio of roughly 22.6 times forecast FY27 earnings and around 22 times FY28 earnings.
That is not a cheap valuation for a mature bank expected to deliver fairly modest earnings growth.
Investors are clearly paying a premium for CBA's quality, market position, and consistency.
For me, though, valuation is only one part of the equation. I would rather own an excellent bank at a reasonable price than choose a weaker business simply because its PE ratio is lower.
Foolish takeaway
I would still be comfortable buying CBA shares as we head into October.
The valuation is higher than I would ideally like, especially given the modest earnings growth currently forecast. But I think CBA remains the highest-quality major bank on the ASX and is well positioned to keep delivering for shareholders.
At around $150.83, I see CBA as a buy for investors prepared to own it for the long term rather than chase a quick return.
