Commonwealth Bank (ASX:CBA) Reports 6% Profit Growth and Raises Dividend- Buy, Hold, or Take Profits?

Commonwealth Bank Beats Forecasts, But Is It Too Expensive?

Commonwealth Bank (ASX: CBA) shares jumped 6.8% to A$169.56 on Wednesday after the bank reported a strong half-year result that was better than expected.
The bank made a cash profit of A$5.45 billion, which is 6% higher than last year and clearly above the A$5.2 billion that analysts were expecting. Because the result was so strong, CBA also increased its interim dividend by 10 cents to A$2.35 per share, fully franked.

Overall, the result looks very solid. CBA is lending more money, its profit margins are holding up, and its balance sheet remains strong.
However, the big concern is the share price valuation. At around 25 times future earnings, CBA is priced very expensively, more like a technology stock than a traditional bank. No one doubts that CBA is a high-quality bank, but the key question is whether these results are good enough to justify paying almost double the valuation of rivals like Westpac or NAB.

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CBA Delivers Where It Matters- Lending Growth, Credit Quality, and Margin Stability

Perhaps the most impressive part of this result is what did not happen. Many investors were worried that CBA’s profit margins would fall because other banks have been cutting home loan rates aggressively to attract customers. But CBA’s net interest margin stayed steady at 2.04%. This shows the bank is not chasing growth at any cost. Instead, it is protecting its profits while still growing, which is not easy to do.

The lending numbers support this. Business lending grew 12%, which is much faster than the overall banking system. Home loan growth was also above the market average. This means CBA is not just holding its ground; it is actually taking customers from other banks. That’s exactly what investors want to see from a stock that trades at a premium price.

Credit quality was also strong. Bad debt charges fell 21% compared to the previous half and were much lower than analysts expected. On top of that, 87% of home loan customers are ahead on their repayments, showing that most Australian households are coping better than expected despite higher interest rates.
CBA also increased its technology spending to A$1.2 billion, including AI-powered fraud systems that now monitor more than 20 million payments every day to catch scams. Overall, from an operational point of view, this was a very clean and strong result.

The Valuation Problem- Is CBA Worth Double Its Peers?

This is where things become a little complicated.
CBA is trading at about 25 times its expected earnings, while banks like Westpac and NAB trade at much lower levels, around the mid-teens. CBA has always been more expensive because it is seen as the best-quality bank. It has strong technology, high returns for shareholders, and more than 9.4 million active app users.
But even a great company can become too expensive.

At the current price of A$169.56, CBA’s dividend yield is about 2.8%, while Westpac offers closer to 4%. For investors who want income, it only makes sense to accept a lower yield if profits are going to grow much faster. Right now, profit growth is only around 5–6%, which does not suggest a big acceleration ahead.
Most analysts are also cautious. According to TipRanks, analysts rate CBA as a “strong sell,” and UBS has a price target of A$125, which is much lower than today’s price. The stock has already fallen 23.5% from its peak of A$192 in late 2025.

We believe CBA deserves to trade at a premium compared to other banks. But at 25 times earnings, investors are paying for near-perfect performance every quarter. And when expectations are that high, even a small disappointment can hurt the share price.

The Investor’s Takeaway for CBA

For investors who already own CBA shares, there is no strong reason to sell. The bank is performing well, bad debts are falling, and the higher dividend shows that management feels confident about the business.

However, for new investors, it may be better to wait. The share price has already recovered strongly from its A$147 low, and at today’s high valuation, even a small problem, like weaker consumer confidence or more people falling behind on loan repayments, could push the stock lower.

Investors who mainly want income should also keep in mind that Westpac and NAB offer higher dividend yields and are trading at lower prices.
In our opinion, CBA is still the best bank in Australia. But being the best company does not always mean it is the best investment at any price. At current levels, investors are paying for near-perfect performance, and staying perfect every quarter is very difficult.