CBA Drives Momentum on ASX 50 Despite Valuation Pressures

June 25, 2025 02:17 PM AEST | By Team Kalkine Media

CBA Drives Momentum on ASX 50 Despite Valuation Pressures — Image source: Shutterstock

Deposit Repricing Supports Margin Stability

A notable factor behind the banks' earnings stability has been their tactical approach to repricing term and savings deposits. Following recent rate adjustments by the Reserve Bank of Australia, banks adjusted term deposit rates and selectively altered savings account structures.

This shift helped preserve profitability by managing the cost of funding, particularly as lending rates remain relatively static due to external pressures and heightened competition. The repricing strategy has provided a cushion for margins during a phase of policy easing.

Provisions Built During Pandemic Offer Flexibility

Major banks are also relying on elevated collective provision buffers, set aside during the pandemic, to support current earnings. These buffers, once released, reduce the need for additional capital to cover loan losses, thereby improving the bottom line.

Institutions like NAB have indicated that current provision levels remain significantly above pre-pandemic baselines, reflecting their capacity to absorb potential volatility without immediate profitability impacts.

Valuation Stretched Despite Limited Growth Prospects

While operational performance remains robust, valuation concerns persist. Certain bank stocks are trading at elevated earnings multiples, with limited forward growth catalysts. Market observers have flagged this as a risk, especially in the context of expected macroeconomic softening from the latter half of 2025 through the following year.

Price Action Leads Sentiment Despite Warnings

Commonwealth Bank’s sustained rally through 2025 has positioned it among the strongest performing financials. Despite widespread downbeat ratings across the sector, the stock’s ascent reflects continued market confidence in its earnings reliability and sector leadership.

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