Commonwealth Bank soars past $300 billion value but experts have concerns

Commonwealth Bank stunned the world with a record valuation that dwarfed even Wall Street’s biggest banks. But not all is what it seems.

Commonwealth Bank shocked the world this week when its value topped an eye-watering $300 billion, dwarfing even Wall Street’s biggest banks and outpacing its Australian competitors.

For some perspective, the staggering rise of CBA puts it well above the combined value of two of the big four banks in Australia — Westpac and National Australia Bank.

It also becomes an outlier as the first ever ASX-listed company to be valued at more than $300 billion and is the most expensive bank stock in the history of the world thanks to a 49 per cent rise in the past 12 months.

But experts say not all is as it seems. One says CBA is completely overvalued and the $300 billion figure ignores “anemic earnings growth”.

Share trader author Alan Hull told news.com.au Commonwealth Bank shares are “a risky share to be buying”.

“Smart money is not buying CBA,” he said. “It’s seriously overvalued. It’s earnings growth is anemic. The current divident yield is 3.74 per cent including tax imputations.

“It’s overpriced, which means it’s a risky share to be buying and it’s only yielding 3.74 per cent.”

He credits CBA’s exponential rise to a “popularity competition”.

“The share price is going up simply because the share price is going up. If you look at the price of CBA shares, it’s exponential. It’s price feeding on price. I buy CBA, I tell you about CBA, price goes up 10 per cent. You buy CBA, price goes up another 10 per cent and you tell all your mates.

CBA shares hit an all-time high earlier this week when the bank became the first ASX-listed company to top $300 billion in value. Picture: NewsWire / Gaye Gerard

“We’ve also got new money coming in. Dumb money starts coming into the market and what do they buy? All the new dumb money is buying CBA. That’s all it is. There’s nothing going on here that is a secret.”

He said all the major shares are running “because that’s all that dumb money knows”.

“That’s the moron portfolio and at the top of the moron portfolio sits CBA.”

So what happens now? Mr Hull has a prediction.

“It’ll get to $200 a share and you’ll probably see a correction,” he said. “Do I think it could go up? Yeah.

“But a big correction is coming. It’s literally 50 per cent overpriced. So when it corrects, it’s going to be a big correction. It’s trading a fair distance away from its underlying fundamentals.”

Chief economist at AMP, Shane Oliver, told news.com.au Commonwealth Bank is benefiting from a number of different factors — one of which being a less hostile US President Donald Trump.

“Its rise lately has mostly been driven by the same factors as the broader market, (including) an easing in concerns about Trump’s tariffs and increased expectations for interest rate cuts, which are seen as positive for the banks,” he said.

“That said there also appears to be an element of momentum by which past relatively strong performance appears to be driving expectations that this will continue, resulting in ongoing strong relative demand for its shares.”

A big correction is coming to CBA shares, according to expert Alan Hull. Picture: NCA NewsWire / Damian Shaw

Mr Hull said CBA is doing nothing different to the other big banks in Australia “apart from being more popular”.

“It’s a popularity competition,” he said. “CBA is first, ANZ is second and Westpac and NAB are third.”

In its latest results, Commonwealth Bank made $9.48 billion after tax, while Westpac made $7 billion, NAB made $6.96 billion and ANZ made $6.53 billion.

Kevin Doodney, an Australian housing futurist at the High Yield Property Group, told news.com.au in April that “the big four Australian banks make up four of the eight most profitable banks in the world”.

“They are making that money from a population of just 27 million people. There’s 8 billion people out there, for Christ’s sake.

“What the Australian public needs to ask is, how on Earth can that be possible? Because, I think the Australian people are going to look at that and go, nah, that’s not possible.”

Mr Doodney said successive federal governments and the Reserve Bank of Australia (RBA) have justified these profits made in the banking sector because they have called for a “robust banking system”.

“I’m calling bulls**t on that, because my attitude is that, you know, for the first time in history, affordable housing is becoming a serious issue for any government, and you’ve got to look at who’s making the money out of that, between either the government themselves or the banking system,” he said.

Originally published as Commonwealth Bank soars past $300 billion value but experts have concerns