CBA’s Offshore Investors Drive Share Surge

Commonwealth Bank’s recent stock rally is being powered by a sharp increase in offshore institutional ownership. This trend has helped the bank outperform local competitors, although it has also sparked new concerns about market concentration and long-term sustainability.

Once seen as "the people’s bank," Commonwealth Bank has undergone a major shift in shareholder composition. Retail investor participation has been declining steadily while foreign funds have taken a stronger position. New data shows offshore institutions now hold 25.5% of CBA, up from 23.8% just a year ago.

The bank’s rising appeal among foreign and passive investors has significantly changed its ownership profile. For nearly ten years, institutional holdings grew slowly from 45% to 48%. However, since September 2023, that figure has surged to 54% according to analysis by local equity advisors. This growth suggests that fund flows rather than company earnings alone are boosting CBA’s share price.

Despite short-term pullbacks, including a 6% dip after reaching a record high of $191.40, the bank’s longer-term performance remains strong. Over the past 12 months, shares have jumped 35%. Since January, CBA has outperformed the broader ASX 200 by more than 11%. In comparison, NAB shares are up 3% while Westpac remains flat and ANZ has risen by just 2%. During the latest quarter, NAB narrowed the performance gap and outpaced CBA in the short term.

As institutional buyers and superannuation funds accumulate more CBA shares, retail investors are continuing to exit. The proportion of direct retail ownership has been falling, with net selling recorded for six straight months. Super funds now hold around 30% of shares in Australia’s largest banks, highlighting a growing concentration of influence among a small group of major investors.

Some fund managers have expressed concern about what they see as a bubble forming from passive investment in top-tier Australian companies. These investors typically buy large stocks to match index weightings, which may drive prices higher without regard for a company’s actual fundamentals.

CBA’s premium valuation may be tested soon. It currently trades at a price-to-earnings ratio of 27.6, well ahead of its peers. NAB trades at 16.7, Westpac is just above 16 and ANZ is the lowest at 13.3. Analysts believe the bank’s full-year results, expected in August, could play a key role in shaping investor sentiment across the sector.

Source: The Australian, Moomoo, Commonwealth Bank Investor Relations

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