Commonwealth Bank of Australia (CBA) passed a milestone on Wednesday when its market capitalisation broke through the A$300 billion (US$194.8 billion) mark.
This came as the share price of Australia’s largest bank and listed company rose $2.46 or 1.38% to $181.10 and hit a record high of $181.39.
CBA was already considered the most expensive bank in the world based on its earnings multiple and overvalued in the eyes of many analysts.
The price has risen 4% this week; almost 7% over the last month, 18% so far in 2025 and 47% over the last year despite the fact that earnings are and expected to remain relatively flat.
The share price strength, which raises concerns about whether a crash is coming, has been attributed to factors including buying by superannuation funds and other large investors trying to achieve performance benchmarks based on market indices.
As CBA represents 12% of the S&P/ASX 200 index, fund managers have to buy the bank and other constituent companies or risk failing these tests.
Solaris Investment Management Chief Investment Officer Michael Bell said the CBA had been driven higher by a “tsunami of buying”, much of which was technical and would not continue forever.
“Valuation does matter and in the case of CBA the technicals will go away and we are not far from that point,” Bell said at a conference on 20 May.
Morningstar Market Strategist Lochlan Halloway said CBA shares were materially overvalued with a forward price earnings ratio of about 26 times, a dividend yield of 3% and a price to book ratio of 3.8 times.
“CBA has looked expensive for some time—and it has continued to defy gravity. We see more compelling opportunities elsewhere,” Halloway wrote in a research report on 15 May when the share price was $166.13.
Morgans Financial analyst Nathan Lead rated CBA a REDUCE with a target price of $97.49 on 14 May when the price was $167.50, arguing potential medium-term returns were too compressed considering the earnings and dividend outlook and elevated trading multiples.
