Commonwealth Bank’s 2025 results: investing long term
Commonwealth Bank’s (ASX:CBA) financial year 2025 (FY25) result might just have been a study in strategic restraint. Cash profit rose 4 per cent to $10.3 billion – right on consensus –underpinned by stronger wholesale banking in the second half and solid growth in both home and business lending.
But the headline number could have been higher. Chief executive Matt Comyn instead chose to run expenses and investment spending above the market’s expectations, signalling he’s more concerned with positioning CBA for the future than making short-term ‘expectation’ traders happy.
The numbers
CBA delivered cash net profit after tax (NPAT) of $10.3 billion, earnings per share (EPS) of $6.12, a return on equity of 13.5 per cent, and a full-year dividend of $4.85 – fully franked – alongside an extended share buyback.
The net interest margin held steady at 2.08 per cent, and the loan impairment expense fell, aided by stable home loan arrears and a still-low unemployment rate.
The home loan book expanded 6 per cent to $600 billion, while business lending grew 11 per cent to $161 billion.
Investor reaction, as reflected in the share price, however, was brutal. Shares fell over five per cent on the day. When asked for an explanation, analysts and traders pointed to the absence of an earnings upgrade, the prospect of net interest margin (NIM) pressure from deposit competition, and rising operating costs.
Short term indeed.
Valuation, gravity and earnings revisions
CBA trades at 4.0 times book and around 28.5 times forward earnings – levels more than three standard deviations above historical averages.
With consensus earnings likely to be revised modestly lower, mainly on NIM and cost assumptions, valuation remains investors’ biggest Achilles heel. Indeed, several brokers, including UBS, maintain a Sell recommendation on the stock despite acknowledging CBA’s quality and conservative balance sheet.
And then there’s the operating leverage, which is challenged in the near term. Cost-to-income is set above 45 per cent as CEO Matt Comyn accelerates hiring 2,000 IT engineers this year, more than a third offshore – and boosts annual investment spend by $300 million to $2.3 billion.
Technology in the headlines (again)
The centrepiece of CBA’s long-term plan is technology investment, particularly in artificial intelligence (AI).
The bank has signed a multi-year partnership with OpenAI to integrate advanced AI tools into customer service, fraud prevention, and internal productivity, and holds a small stake in OpenAI rival Anthropic.
CBA’s Comyn sees AI as a transformative force for efficiency, cost-to-income, and competitive differentiation, but warns the real benefits will take years to materialise. In the meantime, the higher spending weighs on short-term profitability, and the market hates a declining asset turnover rate.
In the company’s briefing and comments to analysts and the media, Comyn frames CBA’s strategy around three forces:
The domestic economy – despite evidence to the contrary, and perhaps politically motivated, the bank describes Australia’s fundamentals as strong, adding that lending must balance housing exposure with productive business investment.
In a nod to geopolitics – CBA is described as a national “champion” institution. One that is vital to sovereign capability.
And finally, technology, and AI disruption – CBA believes this will reshape cost structures and customer engagement, with early movers gaining a durable edge.
The long view
Having pushed prices to all time highs, investors may have wanted a near-term upgrade, but Comyn’s capital allocation choices – maintaining a $2.6 billion loan-loss buffer, preserving capital well above regulatory minimums, and leaning into technology – signal a preference for durable advantage over quarter-to-quarter ‘beats’.
For investors, the question now is whether the ‘premium’ earnings and book value multiple can be sustained through what may be a flatter earnings phase. If Comyn is right, the AI and business banking bets made now could underpin the next leg of CBA’s growth. If he’s wrong, the market’s patience for long-term strategy at a lofty valuation could wear thin.
Disclaimer:
The Montgomery Fund, Montgomery [Private] Fund, and the Australian Eagle Equities Fund own shares in Commonwealth Bank of Australia. This article was prepared 21 August 2025 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade this company, you should seek financial advice.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
