The Commonwealth Bank of Australia (ASX: CBA) share price has seen its fair share of volatility over the last year.
It has gone as high as around $183 and as low as $147. That’s a big swing of valuation.
At the moment it’s trading at around $150, which means it’s a lot closer to its 52-week low than the 52-week high.
It’s understandable why the CBA share price has dropped.
Headwinds facing the economy
As the biggest ASX bank share, its success is heavily linked to the performance of the economy and property market.
Recently announced tax changes to negative gearing and capital gains has reduced the demand for loans, particularly from investors. This has led to a double-digit decline in loan demand in the short-term for banks.
How long will credit see reduced demand? If it continues throughout FY27, it could be a problem for the bank’s credit growth and earnings growth in FY27. I don’t think anyone can accurately predict how long house prices will continue their descent.
Normally, we can look at the previous financial year to see some trends and perhaps assume a similar sort of growth rate. But, economic conditions have changed significantly since FY26, even though it delivered an impressive 8% growth of statutory net profit.
How much is a business worth when earnings aren’t growing? Less than when it was growing, in my view.
The higher cost of living and elevated interest rates could lead to higher arrears and bad debts for Commonwealth Bank. Borrowers can only absorb so much in elevated costs before some can no longer afford to make payments. It’s an uncertain outlook for the business.
Is the CBA share price now attractively priced?
Commonwealth Bank shares have now fallen quite a bit, could it now be undervalued?
Despite the CBA share price falling 17% since 4 August 2026, it still has a much higher price/earnings (P/E) ratio than the other banks. Using the earnings estimate on Commsec, the Commonwealth Bank share price is now valued at 22.5x FY27’s estimated earnings.
With a projection that CBA earnings may only grow 3% in FY28, I don’t think it’s an appealing time to buy. There are plenty of other ASX dividend shares that could deliver more growth and I’m focused on them.
