CBA Shares Soar While Dividend Questions Mount

Commonwealth Bank’s soaring share price is turning heads as it reaches new highs, driven by investors seeking stability in a volatile sector, but fund managers are raising red flags about the long-term health of bank dividends.

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Pick & Scroll News
May 18, 2025

Commonwealth Bank’s soaring share price is turning heads as it reaches new highs, driven by investors seeking stability in a volatile sector, but fund managers are raising red flags about the long-term health of bank dividends. Despite CBA rallying more than 40% over the past year, financial experts warn that sustained payouts may become harder to maintain across Australia’s biggest lenders.


Australia’s major banks are under increasing pressure as competition intensifies, funding costs climb and the outlook for profit growth fades. While CBA remains the standout performer, reporting solid capital reserves and consistent dividends, others in the sector like Westpac, NAB and ANZ are struggling to keep pace, both in terms of share price growth and financial resilience.


The numbers are stark: CBA’s share price topped $172, valuing the bank at $288 billion and outpacing its rivals - Westpac rose 18% over the year, NAB 7% and ANZ just 3%. Analysts believe that CBA's strong capital base helps it absorb economic shocks without needing to raise funds, unlike its peers that may face dividend cuts if profits stay muted or decline further.


Looking ahead, the broader sector faces potential turbulence. Markets are pricing in interest rate cuts, with some forecasts suggesting the cash rate could fall to 2.6% by early next year. While this may support the broader economy, it also adds pressure to bank margins - at a time when profitability is already being squeezed and competition is not easing.


Amid these shifts, passive investment strategies are driving inflows into CBA due to its dominant market presence, making it the default choice for many index-based funds. Still, several fund managers suggest that its current valuation, while supported by strong fundamentals, may be inflated compared to the real return prospects - particularly if foreign capital starts flowing into other global markets.


CBA’s strength makes it look like a safer bet for now, but market experts aren’t ruling out future setbacks if global investor sentiment turns or macroeconomic events shake the region. While timing the market is risky, some caution that high entry prices may limit long-term returns, especially when contrasted with the underperformance of peers whose stocks haven’t reached their highs from nearly a decade ago.