Australia Banks: Is CBA‘s housing risk more in the multiple than the earnings?

Research evidence excerpt

Australia Banks: Is CBA‘s housing risk more in the multiple than the earnings?

Australia Banks

17 July 2026 Citi Research

For many companies, if there was a material regulatory intervention into its key

market with clear signs it was having an impact, you would expect downwards

momentum in the shares. CBA seems to have bucked that logic, as despite the

clear evidence that the budget and higher rates are starting to slow the housing &

mortgage market, the shares are up 7% for the month and a resounding ~8% for

the YTD.

Figure 1. What budget?

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Source: Citi Research, FactSet

Heading into the result season, we thought that there was a pocket of clear air for

CBA and the rest of the banks. Volume growth continues to be strong (backward

looking), NIMs benefit from averaging in rate rises, capital benefits from IRRBB

relief and credit quality appears to be holding up for now. We think this delivers

QoQ earnings growth of ~3% for CBA. Hardly a compelling number, but a reversion

to a reasonable trend after a mid-single digit decline in profits in the March quarter.

We find investors generally have agreed with this narrative, and with a bit of help

from other sectors a rotation is seeing CBA perceived to be a relatively safer place to

hide this reporting season. One key pushback, however, that we receive from

investors is whether the turn in house prices will trigger a top-up to provisioning

through the ECL framework. We are ~10% below consensus for bad debts and ~1%

ahead of consensus NPAT for CBA so we don’t necessarily agree with that.

However, given the sensitivity of CBA in general to housing, one has to wonder

whether CBA can look relatively safe for the quarter but perhaps not for the year.