{"id":689332,"date":"2026-05-23T11:11:11","date_gmt":"2026-05-23T11:11:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/689332\/"},"modified":"2026-05-23T11:11:11","modified_gmt":"2026-05-23T11:11:11","slug":"2-tools-to-value-the-commonwealth-bank-of-australia-asx-cba-share-price-2","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/689332\/","title":{"rendered":"2 tools to value the Commonwealth Bank of Australia (ASX: CBA) share price"},"content":{"rendered":"

The CBA share price is trading near $165.67 today. Like us, you might be asking if Commonwealth Bank of Australia (ASX: CBA<\/a>) shares are in the money.<\/p>\n

Commonwealth Bank of Australia, or CBA for short, is Australia\u2019s largest bank, with a leading market share of mortgages (20%+), credit cards (25%+) and personal loans. It has over 15 million customers with most of them in Australia. Basically, it is entrenched in the Australian payments ecosystem and financial marketplace.\u00a0<\/p>\n

CBA share price <\/p>\n

How analysts can study culture<\/p>\n

For long-term investors looking to invest in great companies and hold them for 5, 10 or 20 years, at Rask we think it\u2019s fair to say that a good workplace and staff culture can lead to improved retention of high-quality personnel and, in turn, long-term financial success of a company. <\/p>\n

One way Aussie investors can get under the hood of a company like Commonwealth Bank of Australia or ANZ Banking Group (ASX: ANZ<\/a>) is to use a HR\/jobs website such as Seek. Seek\u2019s website includes data on the culture of companies, including things like employee reviews. According to the most recent data we pulled on CBA, for example, the company\u2019s overall workplace culture rating of 3.4\/5 was more than the ASX banking sector average rating of 3.1.<\/p>\n

Is lending profitable?<\/p>\n

ASX bank shares<\/a> such as CBA need deposits and good profit margins to make their business profitable. Meaning, a bank gets money from term deposit holders and wholesale debt investors and lends that money to homeowners, businesses and investors. The difference between what a bank pays to savers and what it makes from mortgage holders (for example) is the net interest margin or NIM. Remember: when it comes to NIMs, the wider the margin the better. <\/p>\n

If you are planning to forecast the profits of a bank like CBA or Macquarie Group Ltd (ASX: MQG<\/a>), knowing how much money the bank lends and what it makes per dollar lent to borrowers is essential. That\u2019s why the NIM is arguably the most essential measure of CBA\u2019s profitability. Across the ASX\u2019s major bank shares, we calculated the average NIM to be 1.78% whereas Commonwealth Bank of Australia\u2019s lending margin was 1.99%, meaning the bank produced a better-than-average return from lending money to customers versus its peers.<\/p>\n

The reason analysts study the NIM so closely is because Commonwealth Bank of Australia earned 85% of its total income (akin to revenue) just from lending last year.<\/p>\n

Why Commonwealth Bank of Australia\u2019s ROE matters<\/p>\n

Return on shareholder equity, also known as \u2018ROE\u2019, helps you compare the profit of a bank against its total shareholder equity, as shown on its balance sheet \u2013 the higher the ROE the better. Commonwealth Bank of Australia\u2019s ROE in the latest full year stood at 13.1%, meaning for every $100 of shareholder equity in the bank it produced $13.10 in yearly profit. This was more than the sector average of 9.35%.<\/p>\n

The downside in bank shares like CBA<\/p>\n

For Australia\u2019s banks, the CET1 ratio (aka \u2018common equity tier one\u2019) is paramount. CET1 represents the bank\u2019s capital buffer which can go towards protecting it against financial collapse \u2013 basically, it\u2019s the proportion of total assets that are \u2018liquid\u2019 or readily available. According to our numbers, Commonwealth Bank of Australia had a CET1 ratio of 12.3% last year. This was more than the sector average.<\/p>\n

Commonwealth Bank of Australia dividend valuations are handy (and pretty easy!)<\/p>\n

A dividend discount model or DDM<\/a> is one of the most efficient ways to create a forecast of ASX bank shares<\/a>. To do a DDM<\/a> we have to take the bank\u2019s last full year of dividends and then apply a risk rating. Last year the total dividend was $4.65. Let\u2019s assume the CBA dividend payment grows at a consistent rate each year into the future, somewhere between 2% and 4%. We will use multiple risk rates (between 6% and 11%) and then average the valuations. The calculation we use is: Share price = full-year dividend \/ (risk rate \u2013 dividend growth rate).<\/p>\n

Growth rate<\/p>\n

2.00%
\n3.00%
\n4.00%<\/p>\n

Risk rate<\/p>\n

6.00%
\n$119.00
\n$158.67
\n$238.00<\/p>\n

7.00%
\n$95.20
\n$119.00
\n$158.67<\/p>\n

8.00%
\n$79.33
\n$95.20
\n$119.00<\/p>\n

9.00%
\n$68.00
\n$79.33
\n$95.20<\/p>\n

10.00%
\n$59.50
\n$68.00
\n$79.33<\/p>\n

11.00%
\n$52.89
\n$59.50
\n$68.00<\/p>\n

According to this quick and simple DDM model, an estimated average valuation of CBA shares is $98.33. However, using an \u2018adjusted\u2019 dividend payment (the expected future dividend) of $4.76 per share, which is the preferred measure because it uses forecast dividends, the valuation goes to $100.66. The valuation compares to CBA\u2019s current share price of $165.67. Since the company\u2019s dividends are fully franked, we can make a further adjustment and do a valuation based on a \u2018gross\u2019 dividend payment (this is the value of the dividend including the franking credit). Using gross dividend payments, the \u2018fair value\u2019 forecast becomes $143.80.<\/p>\n

What this means is that the CBA share price might seem expensive using our simple DDM model, but this is just one of many steps you should take before making an investment decision. It\u2019s important to consider all of the risks and ideas we presented here, including the benefit of growing dividends and the good impact of franking credits.<\/p>\n

To learn more about analysis and valuation, consider getting our free investment report emailed to you (keep reading). This should just be one of many steps when making an investment decision. Consider reading at least two or three years\u2019 worth of Commonwealth Bank of Australia annual reports and then seek out good investors and analysis that disagrees with your perspective \u2013 that\u2019s an informed way to figure out if you\u2019re making a good decision based on rigorous analysis and considering alternative opinions. Finally, before going any further with CBA or ANZ shares, I suggest getting a copy of our free investment report.<\/p>\n","protected":false},"excerpt":{"rendered":"The CBA share price is trading near $165.67 today. Like us, you might be asking if Commonwealth Bank…\n","protected":false},"author":2,"featured_media":689333,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[64,63,126275,126276,126277,44],"class_list":["post-689332","post","type-post","status-publish","format-standard","has-post-thumbnail","category-australia","tag-au","tag-australia","tag-australia-and-new-zealand-banking-group-ltd-asxanz","tag-commonwealth-bank-of-australia-asxcba","tag-macquarie-group-ltd-asxmqg","tag-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/689332","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=689332"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/689332\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/689333"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=689332"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=689332"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=689332"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}