Commonwealth Bank of Australia (CBA) shares experienced a record fall on Wednesday, as investors reacted negatively to the federal budget and the bank's half-year results. The stock plunged more than 8% in early trading, wiping billions off the bank's market value.
Market reaction
The sharp decline came after the bank reported a 5% drop in cash profit to $4.7 billion for the half year, missing analyst expectations. Higher provisions for bad debts and increased competition in home lending weighed on earnings. The result was released just hours after the federal budget outlined measures that could impact the banking sector, including tighter regulations on mortgage lending.
Budget impact
Treasurer Jim Chalmers' budget included plans to increase the major bank levy and introduce new capital requirements, which analysts say could reduce profitability for the big four banks. CBA, being the largest mortgage lender, is seen as particularly vulnerable. The combination of weaker earnings and regulatory headwinds spooked investors, leading to the sell-off.
Broader market effects
The sell-off dragged the broader ASX 200 index lower, with the financial sector falling 3.5%. Other major banks also declined, though not as sharply as CBA. Westpac dropped 2.1%, NAB fell 1.8%, and ANZ lost 1.5%. The index closed down 1.2% for the day.
Analyst commentary
Analysts at UBS downgraded CBA to a sell rating, citing the challenging outlook. "The combination of rising costs, higher bad debts, and regulatory changes will pressure earnings," they said. "We see limited upside for the stock in the near term."
Shareholder impact
Long-term shareholders, including retail investors and superannuation funds, have been hit hard. The fall erased more than $15 billion in market capitalisation. Some investors are questioning whether the bank's dividend, which was maintained at $2.00 per share, is sustainable given the earnings decline.
Looking ahead
CBA CEO Matt Comyn acknowledged the challenging environment but expressed confidence in the bank's strategy. "We are focused on managing costs, improving efficiency, and supporting our customers through difficult economic conditions," he said. However, the market remains sceptical, with many expecting further downside.
The share price closed at $89.50, down 7.6% for the session. It is now trading at its lowest level since October 2024.
