Why Commonwealth Bank (ASX:CBA) Stock Lost $15 Billion Overnight. What Investors Should Watch Next

CBA’s $15 Billion Wake-Up Call

On the ASX, $15 billion can disappear in a single day, and that is exactly what happened to Commonwealth Bank (ASX: CBA) this week after releasing its 2025 results.

It was not a profit warning, nor a shock loss. In fact, the numbers were strong. But in markets, strength can be relative, and CBA is playing in a different league. Trading at nearly 30 times forward earnings, about double the valuation of its big-bank peers, it has been priced more like a high-growth tech stock than a century-old bank.

The dilemma for investors is simple: when a stock is priced for perfection, “good” results can feel like a letdown. With margins under pressure from a tougher economy and growth looking steady rather than spectacular, the question is whether this premium can hold — or if the market is rewriting CBA’s story.

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Margins Under Pressure

We might be seeing the cracks beneath CBA’s glossy headline numbers. Yes, loan growth was strong and cash profit climbed to $10.25 billion in FY25, but margins, the lifeblood of any bank’s profitability, are shrinking.

The net interest margin (NIM) slipped from 2.07 percent to 1.99 percent, a drop management attributes to falling interest rates, customers parking money in higher-yield accounts, and intense competition in both home and business lending.

Net interest margin is basically how much profit a bank makes on its lending after paying interest to depositors, shown as a percentage of the money it lends or invests.

For us as investors, that matters. Without margin expansion, profit growth gets harder to sustain, forcing the bank to rely more heavily on cost cuts, fee income, and pure volume to keep earnings moving. It is a reminder that even market leaders need more than size to keep the growth story alive.

RBA Cuts: Boost or Burden for CBA?

The Reserve Bank of Australia’s interest rate path plays a crucial role in bank profitability, and for CBA it is very much a double-edged sword. If the RBA moves deeper into a rate-cutting cycle to support the economy, it will squeeze net interest margins, as banks earn less on their loan books compared with what they pay on deposits.

With the RBA already signalling the early stages of a potential cut cycle, this pressure on margins could intensify. On the flip side, lower rates tend to boost loan demand. Cheaper borrowing costs can encourage households to take on new mortgages and prompt businesses to invest, driving fresh credit growth.

For a bank with CBA’s size, brand strength, and nationwide network, even a modest lift in lending activity could add billions to the loan book. The question for investors is whether that extra volume will be enough to offset the profit squeeze from thinner margins.

CBA’s Premium Valuation Meets an Identity Crisis

After watching CBA soar to all-time highs, we saw how quickly sentiment can turn. The bank’s drop did not just hit shareholders, its heavy weight in the ASX 200 meant the entire market felt the pull.

On paper, the results looked strong: a record $10.25 billion cash profit, a lift in the final dividend to $2.40 per share, and a full-year payout of $4.85, fully franked. That is a 72 percent payout ratio, right at the top of their target range.

But here is the catch — these numbers met expectations, they did not beat them, and much of the “high yield” story was already baked into the share price.

We are left with an odd mismatch. CBA is priced like a growth stock, yet its actions, boosting dividends and appealing to income seekers, make it look more like a defensive yield play. As investors, that tension matters because it forces us to ask: which story will the market believe next?