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Commonwealth Bank just had its worst day since 2020 — Here’s what triggered it
Commonwealth Bank shares fell sharply after housing tax reforms and weaker quarterly earnings raised concerns around mortgage growth and banking sector exposure to the property market. The sell-off spread across major lenders as investors reacted to slowing home loan activity, rising provisions and broader economic risks linked to global uncertainty.
Commonwealth Bank shares dropped after housing tax reforms and quarterly earnings disappointed investors, reviving concerns about slower mortgage growth and increasing pressure on property-focused banking stocks.
Key Highlights
- Commonwealth Bank shares recorded their biggest one-day drop since March 2020.
- The lender reported A$2.7 billion quarterly cash profit, below analyst expectations.
- Housing tax reforms renewed concerns around slower mortgage and housing credit growth.
- New home loan activity fell 6.2% in the March quarter, ABS data showed.
Commonwealth Bank shares fell about 9% on May 13 after new housing tax measures and weaker-than-expected quarterly earnings unsettled investors. The decline marked the lender’s sharpest one-day drop since the pandemic-driven market sell-off in March 2020.
The fall spread across the banking sector, with Westpac, ANZ and National Australia Bank also trading lower during the session. Financial stocks were among the weakest performers on the ASX after the federal budget announcement.
The latest sell-off comes at a time when investors have already been watching signs of slower housing activity and rising household pressure linked to higher borrowing costs.
Quarterly Profit Miss Adds to Pressure
Commonwealth Bank reported quarterly cash net profit after tax of A$2.7 billion for the March quarter. While profit was slightly above last year’s level, the result missed analyst forecasts by roughly 2%.
The bank also lifted collective provisions by A$200 million, taking total loan impairment expenses to A$316 million from A$223 million a year earlier. The lender pointed to inflation pressures, geopolitical risks, and supply chain disruptions linked to the Middle East conflict.
Chief executive Matt Comyn said cost-of-living pressure continued to affect households and businesses. Earlier this year, the bank posted first-half cash earnings of A$5.45 billion.
Housing Market Exposure Back in Focus
Investor attention shifted quickly to the government’s housing tax reforms. The budget proposed limiting negative gearing benefits on residential property investments to newly built homes from July 2027.
The government also plans to replace the current 50% capital gains tax discount with a 30% minimum tax on inflation-adjusted gains for future investments. Existing property holdings will remain under current rules.
The changes have renewed concerns around banks heavily tied to mortgage lending. According to a Jefferies report, investor mortgages account for nearly 40% of mortgage market activity.
Fresh Australian Bureau of Statistics data released on May 13 showed new home loans fell 6.2% in the March quarter, adding to concerns about slower credit growth across the sector.
The market reaction also mirrors broader global caution around property-linked lenders. In recent days, several European banks, including Belgium’s KBC Group, increased provisions tied to geopolitical and economic risks.
FAQs
Q1. Why did Commonwealth Bank shares fall sharply?
Commonwealth Bank shares dropped after housing tax reforms and weaker-than-expected quarterly earnings unsettled investors.
Q2. What housing tax changes were announced?
The government proposed limiting negative gearing to new homes and changing capital gains tax rules from July 2027.
Q3. How much profit did Commonwealth Bank report?
The bank posted quarterly cash net profit after tax of A$2.7 billion for the March quarter.
Q4. Why are investors concerned about mortgage growth?
Analysts say the new tax measures could reduce investor demand for housing loans and slow credit growth.
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