Commonwealth Bank of Australia [ASX:CBA] is a provider of banking services in Australia and New Zealand. It also has some limited banking operations in Asia Pacific, United Kingdom and America. BankWest is owned by CBA.
It offers retail, business and institutional services in Australia.
The 102 year old bank was government owned until 1996.
The share price closed 0.89% lower on Wednesday.
CBA announced a mammoth $8.63 billion net profit for the 2014 financial year.
This was $1.01 billion dollars more than 2013. Also, cash earnings — a measure analysts watch that takes out some costs and one off items — was a 12% higher to $8.68 billion.
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And yet the share price fell today.
The biggest driver behind the net profit was the increase in in home loans. Low interest rates and high house prices are a good combination for a bank’s bottom line.
Also, CBA claimed a gradual increase in consumer spending, and a rise in demand for business credit has helped. The bank forecast both of these should remain steady if global markets remain stable.
Finally, the Commonwealth Bank increased the interim dividend to $2.18. Bringing 2014’s total dividend to $4.01. This is a 10% increase on the year before.
So why did the stock fall? Did the market expect more? Unlikely.
Today’s price fall is very much a profit taking exercise. The Commonwealth bank share price hit an all time high of $83.75 on 31 July 2014. Since then the share price has sold off to around $80.90. The high profits and increase in dividend would have encouraged many to sell in case this is the top for CBA.
Whether the bank’s share price can move past $84 remains from here remains to be seen. In the interim, expect some flattening out in the share price.
Shae Smith+
Editor, Money Weekend
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