The Commonwealth Bank of Australia (ASX: CBA) share price has seen plenty of ups and downs over the past six months. Is it a buy?
FY23 update
The bank has announced today an update about its FY23 financial result that will include notable items that are going to be included within operating expenses in the second half of FY23.
It comes at a total cost of $212 million, and these provisions are pre-tax.
CBA didn’t outline how the provisions were apportioned between each part, but some of the costs were associated with Bankwest, including the transition of business banking to CBA, and changes in the group’s operating model.
The rest of the provision related to the one-off levy for the Compensation Scheme of Last Resort after approval by the Australian Parliament in June 2023.
CBA said that it is going to exclude these items from its underlying operating expenses measure, and present operating expenses both on an underlying and headline basis.
Is the CBA share price a buy?
I understand why CBA has said these expenditure items are separate to its underlying expenses, but one-offs seem to happen so regularly for the large banks that it seems investors should just regularly expect a profit hit.
To me, CBA is one of the highest quality banks on the ASX, with Macquarie Group Ltd
(ASX: MQG) being one of the best as well.
CBA trades at such a high valuation, referring to its price/earnings ratio (p/e ratio), that it doesn’t seem like good value right now. I’m concerned about the potential of there being a wave of arrears of borrowers can’t handle the shift to the higher interest rate environment.
How can CBA grow profit at a good pace in that environment? I don’t believe competition will ever get back to how it was a decade ago, so I don’t see how CBA can outperform over the long-term with it already commanding such a large market share.
