The Commonwealth Bank of Australia (ASX: CBA) share price is up 4% as it finished its share buyback.
CBA finishes its buyback
It has finished its $6 billion off-market share buy-back of CBA shares.
The buyback has enabled CBA to buy back approximately 67.7 million CBA shares, representing 3.8% of the issue capital of CBA. This reduces its common equity tier 1 (CET1) capital ratio by 133 basis points.
CBA said that the buyback price was $88.62.
Strong demand
The big four ASX bank said that due to the strong demand for the buy-back, a scale back of applications was required. It was structured to minimise disadvantaging shareholders with a small number of shares.
Applications for the priority allocation were accepted, but scaled back by 79.4% on a pro-rata basis.
In addition, successful shareholders were offered to sell all of their shares at a 14% discount or as final price application and who would be left with 20 shares or less as a result of the scale back, had all their shares bought back in full.
Applications at discounts of 10% to 13% and applications upon a minimum price above the buy-back price were not bought back. Shares that were offered but not bought back are expected to be released into shareholders’ holdings by 5 October 2021.
Thoughts on the CBA share price
CBA shares have performed very strongly. Over the last six months, it has gone up more than 20%. In the past year it has risen 58%.
There’s no doubt that CBA is a high-quality bank, perhaps one of the best in the world.
But it also comes with a very high price when it comes to the earnings multiple that the CBA share is at. Independent CommSec numbers puts the CBA share price at 19 times the estimated earnings for the 2023 financial year.
I do think that CBA is worth a premium compared to other ASX banks like National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group Ltd (ASX: ANZ), or global banks, but not as much as it is.
In terms of the dividend yield, CBA is expected to pay a fully franked dividend yield of 3.75% in the 2022 financial year.
At this level, there are other ASX dividend shares that I am focused on.
