Here's why the CBA share price had such a good run in December

Christmas keeps on giving for CBA…

| More on:
a nerdish looking man with a lovely big smile adjusts his bow tie and raises his eyebrows behind his thick glasses, as he wears a heavy knitted Christmas sweater in traditional Christmas colours of green and red.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Commonwealth Bank of Australia (ASX: CBA) share price has kicked off 2022 in a positive way so far this Tuesday. At the time of writing, CBA shares are up a pleasing 1.42% at $102.43 each.

This latest surge is redolent of the strong month Commonwealth Bank has just enjoyed. Over December, this ASX banking giant rose from $93.18 a share all the way to the flat $101 it closed at on New Year's Eve. That's a very healthy gain of 8.4% for the month, and cemented a robust 23% gain for CBA shares over 2021, not including dividend returns.

So how did CBA, the ASX's largest bank share, manage such a pleasing December?

Well, it was a month that brought no real major developments from CBA. The bank bumped up its fixed lending rates for housing loans during the month. As we reported at the time, CommBank increased its owner-occupier fixed rate by 0.05% during December to 2.54%.

It beefed up longer-term rates even more, raising its 3-year fixed rate by 0.15% to 3.14%. Its 4-year rate also got a hike, rising by 0.25% to 3.34%.

Now, higher rates obviously mean more cash flow for CBA, but this could be counterbalanced by higher wholesale funding costs across the banking sector. Even so, it seems investors were pleased (or, at the very least, didn't care).

Brokers try to ruin CBA's Christmas

CBA also had to weather some negative broker notes over December. As my Fool colleague James reported late last month, brokers at Macquarie slapped an 'underperform' rating on CBA shares, with a 12-month share price target of $86. Macquarie sees aggressive competition for the home loan market weighing on CBA's margins. But Macquarie wasn't the only broker grinching the CBA's Christmas celebrations.

We also covered fellow broker Morgans' 'reduce' rating on Commonwealth Bank. It sees CBA shares falling to $73 over the next year or so, and estimates that the share price premium CBA enjoys against the other ASX banks won't last.

But investors shrugged off these concerns over December, and shot CBA shares higher. Perhaps this was just a result of overall market sentiment, seeing as the S&P/ASX 200 Index (ASX: XJO) basked in a monthly gain of 2.6% over December. Whatever the reason, CBA has certainly delivered some Christmas cheer to its shareholders.

At the current Commonwealth Bank of Australia share price, CBA shares offer a dividend yield of 3.42%.

Motley Fool contributor Sebastian Bowen 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 recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Bank Shares

A man looking at his laptop and thinking.
Bank Shares

Should you buy the dip on Bank of Queensland shares?

The BOQ share price has dipped since mid-October.

Read more »

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Bank Shares

Are Macquarie or Westpac shares a better buy?

This would be my choice out of these banking giants.

Read more »

CBA share price represented by branch welcome sign
Bank Shares

Can the CBA share price hit $150 in the next year? Here's what the experts say

CBA has delivered outsized returns. Can it keep rising?

Read more »

Several fingers point at stressed looking man in the middle.
Bank Shares

Own ANZ shares? The bank is now #1 on a notorious list

The regulator is stepping up efforts.

Read more »

A man in a suit smiles at the yellow piggy bank he holds in his hand.
Earnings Results

Westpac shares on watch amid $6.99b profit and new buyback

Has the big four bank delivered the goods for investors this year? Let's find out.

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Bank Shares

Why are ASX bank shares falling today when investor loans have jumped 30%?

It’s a rough day for the financial sector.

Read more »

Two male ASX 200 analysts stand in an office looking at various computer screens showing share prices
Earnings Results

Macquarie share price sinks despite $1.6b half year profit and new buyback

How did this investment bank perform during the first half? Let's find out.

Read more »

Nervous customer in discussions at a bank.
Bank Shares

Buying ANZ shares? Here's your FY24 results preview

Will the banking giant deliver profit growth in FY 2024?

Read more »