Is it time to buy the CBA (ASX: CBA) share price?
What is CBA?
CBA is Australia’s largest bank, with commanding market share of 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 worth buying?
CBA has seen its share price fall 33.4% since the share market turned sour. In normal circumstances this could seem like a very attractive buying opportunity for bank investors.
But there are worries that the economic pain is just getting started. It’s why the share prices of ANZ (ASX: ANZ), Westpac (ASX: WBC) and NAB (ASX: NAB) shares are down around 40%. I believe that CBA is down less because investors have a higher opinion of CBA’s ability to weather this period.
Banks like CBA are going to see reduced profitability as a result of the RBA interest rate going to almost 0%. Payment holidays will delay the problem for later in the year. But it really depends how the wider economy and COVID-19 is going. Which way do you think things are going to grow?
If Australia is able to essentially able to almost eradicate COVID-19 from our shores then most industries could start operating like normal. Perhaps we’d even be able to have some cross-tourism with New Zealand.
What about the CBA dividend?
The Australian Prudential Regulation Authority (APRA) wants Australian banks to really reduce their dividends. The Reserve Bank of New Zealand (RBNZ) doesn’t want Kiwi banks to pay dividends at all.
CBA is very likely to reduce its dividend. But I don’t think it’s going to suspend the dividend completely.
It’s hard to see CBA coming through COVID-19 unscathed. It would be my preferred big bank, but there are many other investments I’d prefer like these technology shares:
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Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.
