Commonwealth Bank of Australia’s All-Time High: Safe Haven or Overvalued Mirage?

Commonwealth Bank of Australia (CBA) shares surged to a record high of $168.70 on May 2, 2025, marking a 4% jump and a new all-time milestone for the bank. The stock’s meteoric rise—from a low of $140.21 on April 7—highlighted investors’ hunger for stability amid global economic uncertainty. Yet, behind the headlines lies a paradox: CBA’s valuation metrics suggest it may be overpriced relative to its peers, raising questions about whether this rally reflects genuine value or fleeting sentiment.

The Surge: Sentiment Over Substance?

CBA’s climb to $168.70 occurred without major news from the bank itself, such as earnings upgrades or strategic shifts. Analysts instead pointed to investors seeking “safe havens” as markets wavered over U.S. trade policies and broader economic risks. Gold stocks fell, but CBA’s dividend yield of 2.8% and perceived stability drew buyers. This preference for safety over fundamentals is starkly illustrated by valuation gaps:

CBA’s P/E ratio of 29.5—nearly double ANZ’s 13.16—underscores its premium pricing. Similarly, ANZ’s 5.86% dividend yield offers a starker contrast to CBA’s modest payout. Yet investors flocked to CBA, suggesting a bet on its resilience rather than its relative value.

The Fundamentals: A Mixed Picture

CBA’s recent financials provide some justification for optimism. In February 2025, it reported a 6.1% rise in first-half profit, driven by higher lending volumes. Even in August 2024, when annual profits dipped, the bank hiked its dividend, signaling confidence. Still, these positives pale against valuation concerns.

The stock’s 12-month gain of 45.44% and YTD rise of 8.5% reflect investor optimism, but the disconnect from peers remains stark. While CBA’s $2.25 dividend in February 2025 and $2.50 payout in August 2024 may satisfy income seekers, its premium multiple risks a correction if sentiment shifts.

Risks on the Horizon

The stock’s retreat to $158.58 by mid-May—down 0.3% from its peak—hints at volatility. Analysts caution that CBA’s overvaluation could leave it vulnerable to broader market swings or a resurgence of trade tensions. The S&P/ASX 200’s 1.7% rise on May 2 suggests confidence in the broader market, but CBA’s premium may not hold if fundamentals falter.

Conclusion: A Delicate Balance

CBA’s record high is a testament to investor demand for stability, but it also signals caution. While the bank’s resilient lending growth and dividend discipline justify some premium, its P/E ratio of 29.5 versus ANZ’s 13.16 raises red flags. Short-term traders might find value in its safe-haven appeal, but long-term investors should weigh whether overvaluation outweighs fundamentals.

As markets remain volatile, CBA’s rally may continue—until it doesn’t. Investors are now left to decide: is this a sturdy foundation for growth, or a mirage built on shaky multiples? The answer could hinge on whether valuation gaps narrow or widen in the months ahead.

Data as of May 2025. Past performance does not guarantee future results.