Citi says that CBA shares could crash 17% from here

One leading broker sees "little compensation for equity risk at current levels."

| More on:
A couple sits on a sofa, each clutching their heads in horror and disbelief, while looking at a laptop screen.

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

Commonwealth Bank of Australia (ASX: CBA) shares have started the week in the red.

At the time of writing, the banking giant's shares are down over 0.5% to $99.47.

This means the shares of Australia's largest bank have pulled back almost 11% from their 52-week high.

Are CBA shares good value?

According to a recent note out of Citi, its analysts believe that the bank's shares are still expensive at this level.

In fact, the broker believes there is significant downside risk for investors picking them up at current prices.

The note reveals that the broker has a sell rating and a $82.50 price target on CBA's shares. This implies a potential downside of 17% for investors over the next 12 months.

And while Citi is expecting an attractive 4.5% fully franked dividend yield in FY 2024, this doesn't change much on a total return basis. After factoring in dividends, the value of your investment would still fall by 12.5% if Citi is on the money with its recommendation.

What did Citi say?

In response to the broker's FY 2023 results, valuation, and outlook, its analysts said:

Overall, we thought the narrative of the result was focused on the strength of the balance sheet, both in excess capital and surplus (& growing) provisions. While we don't disagree, we thought there was a lack of focus on the challenges facing core earnings, with revenue set to moderate (2H NIM declined despite rising rates, slowing volumes) and costs likely to be similarly high in FY24E. We forecast falling core earnings, which all else equal, is set to drive the P/E higher at the current valuation. We maintain our Sell recommendation, and think investors receive little compensation for equity risk at current levels.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

Shocked office worker staring at computer screen with colleagues working in the background.
Bank Shares

The ASX bank share beating CBA in 2025

Many investors might not realise this smaller bank stock is leading the pack this year. 

Read more »

man thinking about whether to invest in bitcoin
Bank Shares

Here's what needs to happen for the CBA share price to try and reach $200

What could drive the CBA share price higher?

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
Bank Shares

Why now could be an opportune time to sell CBA shares

A leading expert offers his verdict on the outlook for CBA shares.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Bank Shares

The Westpac share price is a buy – UBS

The broker is optimistic on Westpac shares.

Read more »

Bank building with the word bank on it.
Bank Shares

The biggest buyers and sellers of ASX 200 bank stocks revealed

Macquarie breaks down who’s been buying and who’s been selling the ASX 200 bank stocks.

Read more »

A young woman sits with her hand to her chin staring off to the side thinking about her investments.
Resources Shares

Should I switch my ASX 200 banking stocks for ASX 200 miners before earnings season?

The ASX 200 Index is dominated by Australia's bank and materials/mining sectors, which together account for around half of the…

Read more »

A man sits in contemplation on his sofa looking at his phone as though he has just heard some serious or interesting news.
Bank Shares

Here's when Westpac says the RBA will now cut interest rates

The RBA surprised everyone by keeping rates on hold last week. So, when will the next cut happen?

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Bank Shares

This is the ASX bank stock with the largest dividend yield right now

Looking to ASX bank stocks for dividend income right now?

Read more »