The Commonwealth Bank of Australia (ASX:CBA) led a rally among major banks on Thursday, closing 1.84% higher at A$173.13. The surge added approximately A$5.23 billion to the lender's market capitalization, accounting for roughly 68% of the total daily market-value increase across Australia's Big Four banks, according to preliminary estimates.
The strong performance further widened CBA's valuation gap with its peers. The bank's price-to-earnings ratio now stands at 28.0, which is 49% higher than the average of National Australia Bank (ASX:NAB), ANZ Group Holdings (ASX:ANZ), and Westpac Banking Corp (ASX:WBC). Investors continue to pay a premium for CBA's perceived quality, even as its dividend yield of 2.86% trails the peer average of approximately 4.35%.
Among the other major banks, NAB rose 1.25% to A$39.76, adding A$1.53 billion in market value. ANZ gained 0.72% to A$36.21, contributing A$0.79 billion, while Westpac edged up 0.14% to A$36.63, adding just A$0.17 billion. The combined market-value increase for the Big Four totalled approximately A$7.71 billion, with CBA's contribution being the most significant.
Over the period from July 10 to July 16, CBA shares climbed 2.5%, outperforming the S&P/ASX 200 index, which advanced only 0.4% during the same timeframe. On Thursday, the broader ASX 200 ended nearly flat at 8,840.7, with financial stocks rising 0.88% to offset a 1.58% decline in the materials sector.
CBA's premium valuation is underpinned by strong operational performance. In February, the bank reported a record first-half cash profit of A$5.45 billion, a 6% increase year-on-year. Home loans grew 3.7%, business lending advanced 6%, and household deposits rose 7.5%. Atlas Funds Management analyst Michael Haynes noted that CBA continues to demonstrate "operational excellence across mortgages" despite intense competition in the lending market.
However, concerns about valuation persist. In May, CBA shares plunged 10.43% in a single trading day, erasing nearly A$30 billion in market capitalization amid increased provisions and worries about mortgage demand. This episode highlighted how quickly the premium can narrow when sentiment shifts.
Looking ahead, CBA's next financial report is scheduled for August 12, leaving the coming week without a major earnings catalyst from the bank. Market attention will likely focus on macroeconomic trends and sector rotation as investors assess whether Thursday's demand for CBA can be sustained amid a dip in global risk appetite following a technology-driven decline on Wall Street.
Key risks include ongoing margin pressure, lagging mortgage growth, and the potential for a further increase in credit provisions, which could widen the valuation gap. Despite these challenges, CBA remains the standout asset in the Australian banking sector. Thursday's figures indicate that investors continue to favour the stock, even at its significantly higher valuation compared to peers.
