Own CBA shares? Here’s why this analyst doesn’t foresee further buybacks

Commonwealth Bank of Australia (ASX: CBA) shares have just ended the week in the red.

The banking giant’s shares dropped 0.5% to $92.59 on Friday.

Why did CBA shares have a subdued day?

Today’s subdued showing by the CBA share price could have been driven by a broker note out of Morgan Stanley yesterday.

That note reveals that the broker believes investors shouldn’t be getting their hopes up for another share buyback anytime soon.

According to the note, the broker believes that CBA and the rest of the big four banks have fewer capital management options than they did a year ago now that average capital ratios are only a touch above pre-pandemic levels.

Furthermore, with rates rising fast to combat inflation and potentially causing a recession, its analysts feel the current environment may be too uncertain to risk further buybacks.

The broker commented:

The major banks have announced $18 billion of buybacks since the middle of last year. However, given a more uncertain operating outlook, we don’t expect any further buybacks to be announced this year.

Shares remain a sell

It is partly for this reason that the broker doesn’t see value in CBA shares at the current level. The note reveals that its analysts have an underweight rating and $79.00 price target on its shares.

Based on the current CBA share price, this implies potential downside of 14.7% for investors over the next 12 months.

The only big four bank the broker is recommending as a buy is Westpac Banking Corp (ASX: WBC).

Its analysts currently have an overweight rating and $22.30 price target on its shares. This suggests potential upside of 12% for investors from current levels.

The post Own CBA shares? Here’s why this analyst doesn’t foresee further buybacks appeared first on The Motley Fool Australia.

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More reading

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• Why are ASX 200 bank shares responding positively to higher interest rates?
• What happened with the CBA share price in the 2022 financial year? 
• What’s going on with ASX 200 bank shares on Tuesday?

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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 recommended Westpac Banking Corporation. 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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