How to trade Commonwealth Bank of Australia shares
The CBA is Australia’s largest central bank. This is how an investor can trade CBA shares.
Understanding Commonwealth Bank of Australia: a brief history
The Commonwealth Bank of Australia (CBA) was born out of the Commonwealth Bank of Australia Act in 1911, and commenced operations in Melbourne in 1912. The bank was established with the intention of creating a 'national bank' for Australia, that operated as both a central bank and commercial banking entity.
Following major structural changes in the Australian economy, and therefore the business model of the Commonwealth Bank, the federal government decided in the late 1950s to break up the bank’s dual functions, isolating the CBA as a solely commercial bank, and creating in turn the Reserve Bank of Australia.
Having specialised its function, the Commonwealth Bank diversified its product and service offering. The bank built its reputation as Australia’s primary retail bank, supporting the nation’s growing economy, especially as it relates to mortgage lending. To this day, the CBA remains Australia’s biggest mortgage bank.
The late 20th century and early 21st century brought with it a global wave of deregulation and privatisation. The Australia banking system was deregulated throughout the 1980s, and the Commonwealth Bank was progressively privatised in the early 1990s, allowing the formation of the bank investors are familiar with today.
CBA shares: the basics
Commonwealth Bank of Australia shares are traded on the ASX, and under the stock ticker ‘CBA’ and it’s also a constituent of the ASX 200. The company is one of the largest companies on the ASX, and is the largest of Australia’s ‘Big Four’ banks, with a market capitalisation of roughly $140 billion.
As of June 2019, there was an approximate total of 1,700,000,000 shares floated on the market. This figure can be used by shareholders to calculate the size of their total share in the company.
CBA share price chart
CBA’s key personnel: who manages the company?
|Matt Comyn||Managing director and chief executive officer (CEO)||The head and public face of the bank. Responsible for the conception and implementation of CBA’s broad strategy of enhancing its core capabilities and improving risk management.|
|David Cohen||Deputy CEO||Responsible for the CBA’s customer relations functions, and the groups’ mergers and acquisitions (M&A) and international financial services divisions. Also supports the CEO in defining the bank’s strategic direction.|
|Adam Bennett||Group executive, business and private banking||In charge of several retail elements of the CBA, including business banking, private banking and Commonwealth Securities (Commsec).|
|Pascal Boilat||Group executive. Enterprise services, and chief information officer||Oversees CBA’s technology offering, as well as the bank’s technology and operations division.|
|Alan Docherty||Chief financial officer (CFO)||Has core responsibility for the overall financial welfare and sustainability of the CBA.|
|Andrew Hinchliff||Group executive, institutional banking and markets||Heads the CBA’s financial market and institutional banking offering, targeting major corporate and government clients.|
|Anna Lenahan||Group general counsel and group executive, group corporate affairs||Leads the CBA’s legal, secretariat, and corporate affairs team, and is responsible for its external and internal affairs, communications, sustainability and corporate governance.|
|Sian Lewis||Group executive, human resources||Manages the groups human resources function.|
|Vittoria Shortt||ASB chief executive||The chief executive of the CBA’s New Zealand operation, ASB Bank.|
|Angus Sullivan||Group executive, retail banking services||Responsible for the CBA’s retail banking services, which includes the bank’s vast network of branches.|
|Nigel Williams||Group chief risk officer||Takes care of the CBA’s risk management strategy and policy, across the bank’s global operations.|
Trading CBA shares
An individual can benefit from fluctuations in the price of CBA shares utilising CFDs, as well as other financial derivatives. Rather than buying and holding the share to derive income or capital gains in the long term, trading allows an individual to speculate on movements higher or lower of the CBA share price.
Moreover, because trading includes the use of leverage, a trader can gain greater exposure to changes in the CBA’s share price than what they would by purchasing the physical share. This means that greater profits can be achieved with a smaller financial outlay; but, of course, at a much higher risk.
What is CBA’s strategy?
Having all but weathered the commercially-stifling Royal Commission into banking and financial services, the Commonwealth Bank of Australia turns its focus to implementing the strategic vision it outlined for itself in its annual report in August 2018. The CBA has aspired to become a 'simpler and better bank' for its customers, with a focus on its core business functions in retail and commercial banking. This means a move away from wealth management, financial planning and insurance services, and instead, directing resources to enhancing its digital product offering, and improving its overall customer service model.
CBA fundamental analysis: how to analyse CBA
|Net Income||Equal to the CBA’s sales, minus its cost of goods sold, general expenses, and other costs. Closely tied to the ultimate earnings of the bank.||$9,200 million|
|Dividend||The distribution of a portion of the CBA’s earnings to its shareholders, as determined by the bank’s board of directors. Measured on a per share basis.||$4.31 (per annum)|
|Earnings Growth||The rate at which the CBA’s earnings are expected to grow. Investors wish to see continued earnings growth. Correlated strongly to the bank’s share price.||4.91% (annualised estimate)|
|Net Interest Margin||A measure of how much the CBA is earning on its investments, against how much it is paying out in interest expenses.||2.10%|
|Price-to-earnings (P/E)||Gauges the CBA’s share price in relation to its earnings. It signifies how much an investor needs to pay to obtain $1 of the bank’s earnings.||16.05|
|Return on Equity (ROE)||Measures the CBA management’s ability to create profits from the assets it owns. A higher ROE is considered desirable by investors.||13.51|
|CET-1 Ratio||Refers to the amount of high-quality capital the CBA possesses in reserve. It helps to limit the bank’s exposure to systemic risk. Global banks have increased these reserves in the years since the global financial crisis to help ward off financial crises.||12.90%|
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