Is the Commonwealth Bank of Australia (ASX: CBA) share price a buy after the RBA’s rate cut?
Commonwealth Bank of Australia or CBA is Australia’s largest bank, with commanding market share of the mortgages (24%), credit cards (27%) and personal lending markets. It has 16.1 million customers, 14.1 million are in Australia. It is entrenched in the Australian payments ecosystem and financial marketplace.
Is The CBA Share Price A Buy?
Many investors might be wondering if the CBA share price is a buy after the Reserve Bank of Australia’s (RBA) interest rate cut yesterday. The interest rate was reduced by 0.25% to 1.25%.
Commonwealth Bank decided to pass on the rate cut in full whereas Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) decided to keep some of the reduction for themselves.
It might have been a smart move to pass on the full rate cut. For one, it means that current and potential borrowers will think of CBA positively and be more likely to use the bank for lending requirements. Secondly. the banks are under the spotlight at the moment after all the attention of the Royal Commission.
Although Westpac and ANZ are drawing the ire of politicians like Treasurer Josh Frydenburg, they have just increased their net interest margin (NIM), which tells us how much profit banks are making between what the lend money out at and how much it costs them to borrow from other sources such as customer deposits.
Is It Time To Buy CBA Shares?
The Commonwealth Bank share price has risen by 10.5% since the start of 2019, it also continues to pay out its large dividend. At the moment Commonwealth Bank offers a fully franked dividend yield of 5.5%.
If CBA’s mortgage delinquencies reverse and start falling then it could be a better option than before the election because of the surprise Liberal win, the supportive policies, the APRA interest rate buffer move and RBA interest rate cuts.
However, I think the CBA share price now reflects the positive changes, for the short term at least, so I think it might be better to go for one of the reliable ASX shares in the free report below.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.