CBA posts big profit - is there any value for investors?

Against a mixed economic backdrop, Commonwealth Bank (ASX: CBA) has once again shown its steel, posting a solid FY26 result and proving it remains the bank to beat in Australia.

With cash profit of $10.98 billion (up 7%), CBA managed to grow at or above the market average in all five core domestic categories - home lending. business lending, consumer finance, household deposits and business deposits - a first for the company and the first time any major bank has done so in 15 years. 

“The Australian economy has remained resilient, supported by historically low unemployment and longer-term investment,” said CBA CEO Matt Comyn. 

“However, growth is slowing, with higher interest rates and inflation placing uneven pressure on household incomes and economic activity."

But does it change anything for investors given CBA's current valution? 

We spoke to Matthew Davison, portfolio manager at ClearBridge Investments, to get his view on CBA's results and the outlook for the market leader going forward. 

CBA FY26 RESULTS

• Cash NPAT up 7% to $10.98bn vs $10.86bn ests (1.1% beat)
• Statutory NPAT up 8% to $10.91bn
• Net interest margin down 3 bps to 2.05%
• Operating expenses up 6% to $13.76bn
• Loan impairment expense up 9% to $788m as home and personal loan arrears rose to 0.73% and 1.72% on cost-of-living pressures
• Final dividend of $2.70 per share fully franked
• Total FY26 dividend up 4% to $5.05, at a 77% payout ratio
• Return on equity rose to 14.0%, with investment spend up 6% to $2.43bn and guided to hold at $2.4bn in FY27

Do you currently hold CBA and what do you rate it?

We do hold the stock but we have an underweight position in CBA across the portfolios.

We just see a mismatch between the valuation and the growth and risk outlook.

What mattered most from the result?

Overall it was a small beat and in line at the underlying, but probably the three key metrics would be the margin, which was generally in line with expectations - no major call outs there.

The second one was just the outlook for credit growth. They definitely got softer for housing credit, but the bank's still talking about a pretty robust business credit backdrop. Obviously the market's very focused on that outlook for housing post-budget. 

The third one was problem loan trends. We did see those edge up, which is consistent with some of the recent industry trends. But there was a bit of pickup in those troublesome loans.

How do those outcomes affect the outlook?

The outcomes from this result I don't think shed too much light on the outlook given the shift we've seen in the domestic economy post-budget in the last few months. 

More importantly, the drop off in housing activity with lower loan applications,  which they talked to, probably sees balance sheet momentum weaken and maybe sees competition on margins jump up, and probably sees home loans and other areas creeping higher. 

I still think the base case for CBA is that it's going to be a pretty resilient earner and it's going to grow low single digits. But the risks have risen, particularly post-budget, and the valuation still remains pretty stretched from an investment point of view. 

What should investors be watching from here?

Management discussed the risks to the outlook and they were cautious but they didn't give a lot away. 

They did focus more on some of the longer term challenges for the economy, so in terms of what to watch, I think probably the biggest risks are just those signs of an acceleration in margin competition. We've seen a little bit in the last few months, particularly on the mortgage side, but also in the deposit product space. The second thing would just be obviously a further leg down in house prices. 

And then on the investment side, the economy has been really strong and we've still got to be mindful of business credit persisting stronger for longer as a positive for groups like CBA.

What could you be wrong about?

There's probably two things. 

If we do get that persistent business credit growth, it's just going to help underpin the earnings for longer. The Australian economy's been so resilient on asset quality for quite a long period of time, so if we get another leg in that, you get a persistence of the status quo and and maybe the shares don't derate. 

I think the presence of passive money demand for the shares is still a factor in how long it takes for the valuation to pull back.