FEAR & GREED | Business News Ask Fear & Greed: Why is Commonwealth Bank considered expensive?
May 22, 2025
The discussion centers around the Commonwealth Bank's record share price and its high price-to-earnings ratio. They compare this bank's valuation to other major Australian banks, revealing why it seems expensive. Insights into debt obligations impacting PE ratios are shared, emphasizing the importance of financial advice before investing. The analysis highlights the bank's solid financial performance and its appeal as a stable investment for international investors, contributing to its strong stock performance.
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Commonwealth Bank's High PE Ratio
- Commonwealth Bank is considered expensive based on its price to earnings (PE) ratio compared to other major Australian banks.
- Its PE ratio is around 30 times earnings, double or more than other banks like ANZ and Westpac.
Market Perceives Safety Premium
- Despite all big banks having strong credit ratings, Commonwealth Bank trades at a substantially higher PE ratio.
- This premium reflects market perception of its safety and attractiveness to overseas investors.
Get Advice Before Buying Bank Shares
- Investors should seek financial advice before buying bank shares due to valuation differences and complexities.
- Commonwealth Bank's momentum and dividends attract investors, but its high price entails risks.