Have CBA shares hit their peak?

Commonwealth Bank of Australia’s A$6 billion oversubscribed share buyback boosted shares to a new high.

  • Commonwealth Bank of Australia (ASX: CBA) share price clears A$106
  • Its A$6 billion share buyback received demand totalling A$24 billion
  • CBA and ANZ were slapped with a multi-million dollar class-action lawsuit
  • Keen to take advantage of CBA’s rising share price? Open an account with us to go long on the stock today.

Slight dip in Commonwealth Bank stock price

Shares of Australia’s largest bank inched down by 0.08% to trade at A$105.08 as of 13:10 AEST in Sydney on Tuesday.

At Monday’s close, CBA’s stock had recorded its best trading session in a year and a half. Clocking a 5.1% price gain, it was the top gainer on the Australian bourse for the day.

That came after the lender closed an oversubscribed off-market buyback of 3.8% of its shares on issue, for A$6 billion.

Still, research teams’ sentiment on CBA shares were largely negative as of Monday night. Nine analysts recommended ‘sell’, while three said ‘buy’ and three suggested ‘hold’, according to Bloomberg data.

Their average 12-month target price was A$89.38, implying a potential downside of 15% based on Monday’s closing price of A$105.16.

Share buyback proves popular with investors

First unveiled in August, the lender’s record A$6 billion share buyback met with hot demand from yield-hungry investors through to its close on Monday.

The offer was oversubscribed by A$18 billion, as total demand came in at a whopping A$24 billion, the Australian Financial Review (AFR) reported.

Under the transaction, CBA will buy back about 67.7 million ordinary shares at A$88.62 apiece, before cancelling them. Proceeds will be paid to shareholders from 08 October 2021.

After taking into account the dividends issued over the last 12 months worth A$3.50 a share, the buyback will return about A$12 billion back into the pockets of participating CBA shareholders, AFR added.

Post-buyback, Commonwealth Bank will continue to have a strong surplus capital position, said CEO Matt Comyn.

The Sydney-based company’s capital management plans delivered ‘far more’ than its peers, Bloomberg said. Australia and New Zealand Banking Group (ANZ) and National Australia Bank recently announced A$1.5 billion and A$2.5 billion buybacks, respectively.

This came as Australia’s biggest lenders joined their global peers in handing back payments to investors, after regulators eased curbs that were meant to safeguard banks from a pandemic-induced hit last year, Bloomberg reported.

Read more: Beginner’s guide to day trading

CBA sued in New Zealand for missed interest refunds

Separately, according to a class-action lawsuit in New Zealand, units of CBA and ANZ did not clearly inform customers of a change in some terms of home and personal loans.

The two banks face a multi-million dollar claim for not refunding more than 150,000 customers the interest and fee charged following the alleged breach in disclosing changes to loan agreements, Reuters reported.

The law firm that filed the case said CBA’s and ANZ’s ‘failures to refund their customers constitute serious breaches of the provisions of the Credit Contracts and Consumer Finance Act 2003’.

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