It's probably the most popular blue-chip fully franked dividend share among retail and institutional investors alike. However, if the analysts at Goldman Sachs are on the money it's time to sell your Commonwealth Bank of Australia (ASX: CBA) shares.
According to a December 5 research note out of the investment bank, CBA shares are too expensive when changing hands for $78.60.
The analysts took another look at CBA in light of the hotly anticipated common equity tier 1 (CET 1) capital requirement updates from the the RBNZ (NZ Central Bank). However, they think CBA's profit outlook has escaped the changes without too much damage.
If a bank is required to carry more idle capital in reserve it has to find ways to fund the requirement, while the bank's return on equity as a key measure of profitability is also likely to be hit. This is because the bank cannot lend out CET 1 capital at profitable rates of return. On the contrary, the capital has to sit idle on the balance sheet as a regulatory buffer against a rainy day.
Goldman's analysts think CBA will be the least affected by the new requirements amongst the big 4 banks that also includes Westpac Banking Corp (ASX: WBC) and ANZ Bank (ASX: ANZ).
However, they still believe CBA shares are too expensive at 16.6x their estimates of FY2020's earnings per share. This multiple is higher than historical averages and peers.
For what's it's worth, If I were in or near retirement and owned CBA shares I'd be inclined to 'hold' on the basis it's difficult to time the market. Over the long term they're likely to be steady performers which again suggests trying to trade in or out of them is best left to speculators.
