For the last nine months, virtually every banking analyst I know has slapped a “sell” on CBA shares … but the share price has kept rising to record levels.
CommBank is a financial beast
This week CBA reported its annual results and I got to interview CEO Matt Comyn on the Ausbiz business streaming network. He is seriously one of the most impressive CEOs in the country – smart, humble, grounded and a great leader.
CBA is the most expensive bank in the world. It’s extraordinary. Valued at 23 times earnings which is double the other Big three Australian banks. CBA is valued as a growth stock. Who would have thought that would ever have happened?
The latest result produced a $9.83 billion half-year profit to the end of June, which was down 4 per cent on the previous six months. But the bank declared a $2.50 final dividend, up on the $2.15 declared for the first half, taking total returns for the year to a record $4.65.
So why is CBA so revered and its share price so expensive?
Have a look at these statistics:
- 35 per cent of all Australian bank customers bank with CBA.
- 64 per cent of all new migrants open an account with CBA.
- 46 per cent of young adults bank with CBA. This is a generation which distrusts big institutions and are incredibly fickle.
The biggest profit earner for the bank is home loans. 72 per cent of all home loans come through a mortgage broker, a middleman, not with CBA.
Of all new home loans, 66 per cent are sold directly to the customer at CBA and only 34 per cent are through a mortgage broker. CBA has literally cut out the middleman which means CBA’s profit margin is bigger.
As I said earlier, CBA is a financial beast.
Under Matt Comyn the bank just has great strategies to attract new customers, which includes the best technology of any bank – by far. Its banking App is the best of any bank and one of the main reasons it dominates the young adult customer market.
Having said all that, most banking analysts still have CBA shares as a “sell”.
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