The Commonwealth Bank of Australia (ASX: CBA) share price is having a difficult time in August, having slipped almost 4% into the red since the start of the month.
The bank, valued at $165 billion by market capitalisation, took a turn for the worse this month. It reversed from previous highs of $102.60 on 8 August to rest at $97.20 before the open on Thursday.
This comes after it climbed 11% in July.
Meanwhile, the S&P/ASX 200 Financials Index (ASX: XFJ) is down around 2% this month, following a similar pattern to CBA on the chart, as seen below.
Image source: Getty Images
What's up with the CBA share price?
ASX financial shares have taken a step backward in recent weeks following a number of macroeconomic uncertainties.
With the Reserve Bank of Australia (RBA) committed to tackling inflation through a series of interest rate hikes, debtholders will directly feel the impulse.
The prospect of higher interest rates has cast a dark cloud over the already saturated Australian mortgage market.
As a result, household and commercial mortgage payments are poised to increase. This comes with the prospect of higher default rates on these mortgages.
The Australian mortgage market is also very concentrated, with the 10 largest mortgage lenders comprising more than 91% of the entire market in 2021.
This combination of a crowded mortgage space along with tighter economic conditions looks to potentially compress bank net interest margins (NIMs).
Net interest margin is a key figure used to evaluate the profitability of banks. Typically, the higher, the better.
In its most recent earnings, CBA printed a NIM of 1.9%, down 18 basis points year on year, and down from 2.07% in 2020.
Furthermore, signs of a slowdown in Australian property have already begun to manifest.
Australian Bureau of Statistics (ABS) data from June revealed the purchase of business property slowed 12% year on year, while owner-occupier house purchases were down 9.6%.
Additionally, new loan commitments narrowed 26% year on year, whereas for first-time buyers, it was 32% lower versus the previous year.
As a result, the pressure is on the Australian mortgage market looking ahead.
What do the analysts think?
Turning to today's performance and analyst sentiment on CBA is also fairly sour at present. The share has no buy ratings, and 10 out of 16 brokers covering it rate it as a sell right now, per Refinitiv Eikon data.
The remaining six brokers rate CBA as a hold. From this list, the consensus price target is $91 per share, suggesting there could be more downside to come if the group is correct.
At the time of writing, the CBA share price is down 0.05% on the day to $97.15.
In the past 12 months, CBA shares have slipped 3% into the red.
