Is the CBA share price a buy following Wednesday’s 5% fall?

A man thinks very carefully about his money and investments.A man thinks very carefully about his money and investments.

It’s fair to say that the Commonwealth Bank of Australia (ASX: CBA) share price had a horrid day yesterday. Wednesday’s session saw CBA shares plunge by a nasty 5.72%.

The ASX 200 bank share closed at $109.25 each on Tuesday. But by the end of yesterday’s session, those same shares were going for $103 on the dot.

Commonwealth Bank is the second-largest share by market capitalisation on the S&P/ASX 200 Index (ASX: XJO). As such, this dramatic fall had a big impact on the entire market.

It’s not really a mystery why CBA shares had such a hard day. The bank began Wednesday by releasing its latest half-year results for FY2023, covering the six months to 31 December 2022.

As we covered at the time, this saw CBA announce a 12% increase in operating income to $13.59 billion, as well as a 9% rise in cash earnings to $5.15 billion.

Investors were also treated to some rewards, including a 20% hike to CBA’s interim dividend to $2.10 per share, as well as a $1 billion extension of Commonwealth Bank’s share buyback program.

That all sounds great, so why did investors punish the CBA share price so convincingly?

Top ASX 200 bank share disappoints investors

Well, as my Fool colleague James went into yesterday, it could be “due to concerns that the bank’s net interest margin has already peaked. If this is the case, it has peaked well ahead of expectations”.

The net interest margin (NIM) is the difference between how much CBA is making in loan interest, and how much interest it is paying to depositors.

So no doubt CommBank’s veritable army of retail investors would be disappointed with what happened yesterday. But perhaps some value investors out there might see this as a buying opportunity for the ASX 200’s largest bank share.

So could CBA shares be in the buy zone after this large and sudden fall in value?

Is the CBA share price a buy after yesterday’s 5% fall?

Well, unfortunately, it’s hard to find an ASX broker who is exceedingly bullish on CBA shares right now.

Yesterday, we covered how broker Goldman Sachs rang the warning bell on CBA’s falling net interest margins. Here’s some of what Goldman had to say there:

Disclosure by CBA suggests that its monthly NIM peaked around the middle of 1H23, which likely implies our 1H24 peak half-year NIM forecast is optimistic.

Goldman already had a sell rating on CBA shares, with a 12-month share price target of just $92.56. So it’s highly doubtful this broker is going to start telling investors to buy with the CBA share price still above $100:

Last week, we also covered the views of Argonaut’s adviser and broker Harrison Massey. Massey was quoted as stating that “the bank offers attractive defensive qualities. However, at recent levels, it may be prudent to trim exposure and pocket a profit”.

So it seems that CBA shares have friends few and far between right now. No doubt ASX investors will be hoping the bank can turn things around. Perhaps even get back to the $110-plus share prices we had been seeing for most of February thus far. But we’ll have to wait and see what happens.

At the last CBA share price, this ASX 200 bank stock had a market capitalisation of $173.9 billion, with a dividend yield of 3.74%.

The post Is the CBA share price a buy following Wednesday’s 5% fall? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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