What’s happening with CBA shares this week?

Commonwealth Bank of Australia (ASX: CBA) shares have outperformed the S&P/ASX 200 Index (ASX: XJO) over the week.

In afternoon trade on Friday, CBA shares are up 1.3% over the five trading days, while the ASX 200 is down 0.2%.

Here’s what’s been putting the ASX bank share in our spotlight this week.

Profits up 2% in first quarter

Tuesday saw CBA shares post their biggest gains of the week, closing up 1.3%.

That came as investors digested the bank’s first-quarter update for the three months ending 30 September.

Highlights included income of approximately $6.6 billion. That was up 9% compared to the second-half average.

CBA’s shares likely also got a boost from the 2% increase in cash net profit after tax, which reached $2.5 billion over the quarter.

CommBank has been one of the ASX 200 stocks to receive some tailwinds from rising interest rates. This helped the bank increase its margins and saw a 16% lift in net interest income growth.

On the other side of the ledger, expenses, excluding remediation, were up 4.5% as well.

CBA’s CEO Matt Comyn pointed to the strength of the bank’s balance sheet and had a fairly bullish take on the outlook for the Aussie economy.

“The economy has shown resilience in the face of growing cost of living and interest-rate pressures, and despite these near-term challenges, we remain optimistic on the medium to long-term outlook,” Comyn said.

Are CBA shares overvalued?

CommBank also hit The Motley Fool headlines over the week as analysts debated whether CBA shares are worth their premium to the other big bank stocks.

CBA trades on a trailing price-to-earnings (P/E) ratio of just over 19 times. That’s significantly higher than its peers.

While not all analysts agree, those at Perennial Value Australian Shares Trust said the fund is underweight on CBA shares due to the bank’s “unjustifiable valuation premium”.

Goldman Sachs is also uncomfortable with CommBank’s current valuation based on its forward P/E ratio. The broker cited that Australia’s biggest bank, while a strong business, faces stiff competition and some trying economic times ahead.

Goldman said it does “not believe its fundamentals justify the 51% 12-mo fwd PER premium it is currently trading on versus peers, compared to the 20% historic average”.

Following Tuesday’s first-quarter update, Goldman has a moderately improved target price of $90.98 for CBA shares. That’s some 14% below the current price of $105.91 per share.

The post What’s happening with CBA shares this week? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben 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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