CBA posts biggest rally since March 2020 as profits, credit quality and dividends beat expectations
CBA shares posted their biggest gain since March 2020 after beating profit expectations and lifting its dividend.
Mentioned
KEY POINTS
- CBA delivered a 5% profit beat at $5.45bn with loan impairment expense 32% better than expected, showing resilient credit quality despite recent rate hikes.
- The bank raised its interim dividend 4% to $2.35 per share while maintaining a CET1 ratio of 12.3%, beating or meeting expectations across all key metrics.
- The result will likely attract target price upgrades, but analysts will likely remain Sell rated due to valuation. CBA currently trades at 28x earnings, down from June 2025 highs of 33x.
Commonwealth Bank (ASX: CBA) shares rallied 6.8% to a three-month high of $169.56 after reporting a stronger-than-expected first-half profit and dividend. The gain marks CBA's largest one-day rally since March 2020 and its biggest move outside the pandemic and GFC.
Date | Close | % Chg |
|---|---|---|
17/03/2020 | $55.37 | 13.26% |
25/11/2008 | $14.55 | 12.51% |
30/03/2020 | $52.35 | 10.91% |
3/02/2009 | $12.43 | 9.83% |
25/03/2020 | $51.08 | 9.47% |
25/03/2008 | $17.52 | 8.02% |
8/09/2008 | $19.20 | 7.89% |
11/02/2026 | $169.56 | 6.80% |
CBA daily price changes ranked from highest to lowest since 1999
Despite ongoing valuation concerns, CBA delivered a clean set of numbers for 1H26:
Cash NPAT up 6% to $5.45bn vs. $5.20bn ests (5% beat)
NIM down 4 bps to 2.04% vs. 2.04% ests (in-line)
Loan impairment expense flat at $319m vs. $472.3m ests (32% better-than-expected)
CET1 ratio of 12.3% vs. 12.3% ests (in-line)
Interim dividend up 4% to $2.35 cps vs. Morgans ests of $2.30 (2.1% beat)
Heading into results season, Morgans said "we expect low single digit EPS growth in 1H26, as does consensus ... we forecast solid growth in 1H26 lending balances offset by a decline in NIM (to 2.02%), mid-single digit cost growth, and rising loan impairment expense."
Against those expectations, CBA delivered slightly better growth, better-than-feared margins and surprisingly resilient credit quality.
Despite the recent RBA interest rate hike, CEO Matt Comyn highlighted several positives:
"A strong labour market and, until recently, easing interest rates, have provided some relief for borrowers, and our credit quality has improved."
"Economic growth strengthened during the half, driven by increases in consumer demand and rising investment in AI and energy infrastructure."
"Home loan arrears decreased 7 bps in the half reflecting lower interest rates and seasonal tax refunds and 87% of home loan customers are now in advance of their scheduled repayments."
Where to from here?
Most analysts will likely raise target prices following the better-than-expected result but remain "Sell" rated due to valuation. CBA currently trades at a trailing 28x compared to its June 2025 peak of 33x and above recent lows of 24x.
"While CBA offers a stronger franchise, higher ROTE and lower risk profile than its peers, we don't believe it justifies CBA's trading metrics," Morgans said.
The market's response shows that execution matters more than multiples. In November, CBA fell 6.5% after reporting a marginally softer-than-expected first quarter update, then dropped a further 7.4% over the following six sessions (11-19 Nov). Today's beat triggered the opposite reaction.
The result reinforces why CBA continues to attract flows despite the price tag: better credit quality, a retail banking focus and a stable dividend policy. Today's strength also lifted the broader banking sector, with Westpac (+2.5%) and NAB (+3.4%) both rallying to fresh all-time highs.
