Stock of the day: Commonwealth Bank of Australia

(AI video summary)

This video was created on 14 May 2025 for IG audiences by ausbiz.

ASX code: CBA

Commonwealth Bank reports stable quarterly profits

Commonwealth Bank of Australia (CBA) has released its third quarter (Q3) update for the three months ended 31 March: 

• Unaudited cash profit: $2.6 billion, flat compared to previous quarters but up 6% year-on-year (YoY)
• Loan impairment expenses: $223 million 
• Operating income: up 1%, driven by lending growth and higher trading income.

CBA stated that its balance sheet remains strong despite acknowledging the current challenging period for Australian households and businesses.

Business lending emerges as competitive battleground

The results highlight business lending as a new competitive battleground in the banking sector. This trend was previously indicated when Judo Capital experienced a significant share price drop several weeks ago, reflecting intensified competition in the business lending space.

Technology investment commands premium pricing

Analysts note that CBA has successfully positioned itself as a technology leader in banking, similar to how Domino's once marketed itself as a technology company rather than a pizza chain.

Under chief executive officer (CEO) Matt Comyn's leadership, the bank has maintained operational excellence, though some question whether this justifies its current premium valuation.

Investment considerations

The stock currently trades at what some describe as 'nosebleed territory,' with valuations considered expensive historically. Despite this, CBA maintains a loyal shareholder base who value its consistent dividends.

Some analysts suggest National Australia Bank (NAB) may offer better value.

With approximately 11.5% weighting in the Australia 200, CBA remains significant for portfolio managers seeking to outperform the market.