CBA

 CBA Commonwealth Bank

04/07/26

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ASX:CBA has delivered stellar long-term total returns, buoyed by strong profitability. However, premium valuations have faced recent headwinds. [1, 2, 3]

Over the last 10 years, CBA’s key financial milestones include:

• Profitability & Revenue: CBA’s net profit has climbed significantly over the decade, consistently hovering between A$9 billion and A$10 billion annually in recent years. [1]

• Return on Equity (ROE): CBA maintains an excellent banking sector ROE. Historically, it has reliably averaged between 13% and 14%. [1, 2, 3]

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The Net Interest Margin (NIM) measures the difference between the interest income a bank generates from loans/assets and the amount it pays out to depositors, relative to its interest-earning assets. It is a primary indicator of a bank's core profitability, lending efficiency, and overall financial health.

A bank's interest-earning assets are the financial instruments on its balance sheet that generate income through interest, making them the primary engine of a bank's core revenue.

The most common types of interest-earning assets include:

• Customer Loans: These are the largest source of interest income and include mortgages, personal loans, credit card balances, and commercial/business loans. [1, 2, 3, 4, 5]
• Investment Securities: Banks invest a portion of their funds in interest-bearing securities like government bonds (e.g., U.S. Treasuries, Australian Government Bonds), corporate debt, and mortgage-backed securities. [1, 2, 3]
• Interbank Loans: Money lent overnight or for short terms to other financial institutions (often referred to as federal funds sold or reverse repurchase agreements). [1, 2]
• Deposits at Central Banks: Cash reserves and balances held at central banking institutions (like the Reserve Bank of Australia or the Federal Reserve) that yield interest. [1, 2]

The profit generated from these assets is called Net Interest Income, which is calculated as the difference between the interest earned on these assets and the interest paid out to depositors on interest-bearing liabilities.

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• Debt: As a retail and commercial bank, CBA carries high raw liabilities (over A$200 billion in wholesale/debt securities), but maintains very healthy Tier 1 capital ratios heavily scrutinized by the Australian Prudential Regulation Authority (APRA). [1]
• Share Price Growth: Despite a recent double-digit pullback caused by shifting federal budgets and geopolitical/lending uncertainties, long-term investors have more than doubled their capital over the decade, including a share price that has sat well above the A$150 mark. [1, 2, 3]

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dividends

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