---
endpoint: analytics
pattern: Financial Services
status: done
latency_ms: 217827
conversation_id: 6a1870bc-4854-4565-8f3b-b1eecbadfbfb
citations: 13
created: 2026-05-31 20:43:42Z
---

# Is CLSA incrementally more positive/negative on CBA. If so, why?

## CLSA on CBA: Incrementally MORE NEGATIVE

**Direction: Negative.** CLSA's stance on Commonwealth Bank of Australia (CBA AU) has been on a steady de-rating path since late-2024, culminating in a formal downgrade and consistent reaffirmation of an **Underperform** call. CBA is also CLSA's **least preferred** name among the Australian majors, sits as a featured "stock to avoid" in CLSA's thematic screens, and carries one of the largest implied downsides to target across CLSA's Australian coverage.

The corpus's latest CBA-tagged note is dated **20 June 2025**, so "latest CLSA view" below is interpreted relative to that date.

---

### 1. The rating trajectory (HLD → U-PF, then reaffirmed twice)

| Date | Report | Rating | Target Price | Direction |
|---|---|---|---|---|
| 13 Nov 2024 | CBA – HLD (Solid earnings trends hold) | **HLD** | A$131.30 (up from A$124.50) [10][11] | Maintain Hold |
| **12 Feb 2025** | CBA – U-PF (Solid but headwinds to increase) | **U-PF (downgrade)** | A$142 (from A$131.30) [6][7] | **DOWNGRADE Hold → Underperform** |
| 14 May 2025 | CBA – U-PF (Continues to deliver but soft outlook) | **U-PF** | A$143 (from A$142) [8] | Reaffirm Underperform |
| 20 Jun 2025 | Australian banks (ANZ the one to watch) | **U-PF** | A$143 [3] | Reaffirm Underperform |

The pivotal event was **12 February 2025**, when CLSA analyst Ed Henning explicitly wrote: *"Given the strong share price and potential headwind on the horizon, we revise our recommendation from Hold to Underperform."* [6] Since then the rating has been reaffirmed on every CBA-anchored update.

As of the 20 June note, CBA was priced at A$182.5 vs target A$143 — implying **–21.7% downside**, the **largest negative skew of any of the four major Australian banks** in CLSA's universe (vs ANZ +9.9%, NAB –12.9%, WBC –17.2%) [3].

---

### 2. Why incrementally more negative — the analyst's reasoning

**(a) Valuation is the dominant issue — it has stretched, not normalised**
- CBA trades at **~29.1x forward PE vs peer average ~15.7x ex-CBA** — CLSA explicitly flags the relative valuation premium as "stretched" [4][5]. Their own valuation table shows CBA trading at a **70% premium to its long-term PE** (14.1x) and a **43% premium to its long-term PB** (2.1x) [3].
- CLSA frames it bluntly in their May 30 "Avoidance of Doubt" screen: *"CBA's valuation charts look gravity defying given it is on 3.8x PB (with ROE of 13.7%) and 28x PER (with no growth)."* [1] The accompanying table summary literally headlines: *"PB of 3.8x for 13% ROE = NUTS… YET THERE IS ZERO GROWTH"* [5].
- The "Avoidance of Doubt" screen is a thematic CLSA basket of names investors should avoid; **CBA is a featured constituent**, sitting alongside Nintendo, Tata Power, HYBE and ST Engineering [1][5].

**(b) Earnings tailwinds are rolling off**
- Replicating-portfolio and equity-hedge tailwinds — a key driver of recent CBA NIM — are explicitly fading. CLSA notes returns are *"sensitive to three and five year swap rates, which have fallen materially in recent months"* and *"margin tailwinds reduce. The impact… will be more evident in FY26 and beyond."* [9]
- In the Feb-12 1H25 review, the analyst flagged headwinds from **deposit competition (-4bps in 1H25), falling cash/swap rates, and basis risk increasing**, modeling a **-1.5bps NIM decline in 2H25 and -2bps in 1H26** [7].

**(c) Rate-cut cycle has arrived — a clear negative for CBA's earnings model**
- By 20 June 2025, **two RBA cuts had already landed** [4], and CLSA expects more. The bank flags this as a sector-wide profit headwind: *"more rate cuts likely adding pressure to bank earnings, buybacks slowing and the tail risk of rotation towards resources."* [4]
- Investment thesis verbatim: *"With rate cuts on the horizon, we see more headwinds coming for CBA and the sector. Given the strong share price and potential headwind on the horizon, we rate CBA Underperform."* [2]

**(d) Positioning + ownership dynamics — limited reasons for upside**
- CLSA explicitly says: *"It's expensive but we also see limited catalysts to make it fall dramatically in the near term. We believe some investors are neutralising their bets and hedge funds are largely avoiding. We continue to see less upside than peers despite some likely flow tailwinds persisting."* [5]
- Buyback capacity is also constrained — the additional 25bp AT1 requirement *"sees less scope for buybacks in the current uncertain environment."* [12]

---

### 3. CBA's relative ranking has DETERIORATED — bottom of the pack

CLSA explicitly ranks the Australian majors. CBA is **dead last** in that preference order, and the order has hardened:

- **29 April 2025**: *"Our preference (12mth view) order remains: ANZ, NAB, WBC then CBA"* [12]
- **20 June 2025**: *"ANZ stands out for us as our preferred pick of the major banks. Our order of preference is ANZ, NAB, Westpac and then CBA."* [4]

Companion ratings on Australian peers (as of 29 Apr 2025) show CBA is the **only Underperform** in the Big Four cohort [13]:
- ANZ — O-PF (Outperform)
- NAB — HLD
- WBC — HLD
- **CBA — U-PF**

The June note title itself ("ANZ the one to watch") signals where CLSA's positive marginal capital is going — and it is not CBA.

---

### 4. What this is NOT

CLSA is not negative on CBA's fundamentals. The franchise commentary remains highly complimentary: *"CBA is Australia's premium bank with the highest ROE, great deposit franchise, best technology platform, peer leading provisioning, elevated capital levels and impressive leadership team. CBA is growing above system in higher margin SME lending and around system in mortgages now returns have slightly improved."* [5][2] Their 3Q25 results note also acknowledged *"solid underlying trends"* [8].

The bear case is **valuation-driven, not operational** — CBA is, in CLSA's words, a high-quality bank trading at a price that no longer reflects rational growth or yield support, against a macro backdrop (RBA cuts) that will actively compress its profit-driver mix.

---

### Bottom line

**Yes — CLSA is incrementally more negative on CBA.** The arc is unambiguous:
1. **Rating** stepped down from Hold to Underperform on 12 Feb 2025 and has been reaffirmed twice [6][8].
2. **Relative ranking** has CBA at the bottom of the Big Four, behind ANZ, NAB and WBC [4][12].
3. **Implied downside** of –21.7% to TP A$143 is the worst in the Australian-bank cohort [3].
4. CBA has been **explicitly added to CLSA's thematic "avoid" screen** ("Avoidance of Doubt", 30 May 2025) on stretched valuation and rate-cut headwinds [1][5].
5. The reasoning is consistent and intensifying: **stretched PE/PB**, **fading replicating-portfolio NIM tailwinds**, **RBA cuts now actually happening**, and **less scope for buybacks** [4][7][9][12].

---

**Sources**
[1] Bits & pieces (Avoidance of Doubt) — CLSA (30 May 2025) — 607960886LinqAlpha.PDF
[2] Australian banks (ANZ the one to watch) — CLSA (20 Jun 2025) — 607962478LinqAlpha.PDF
[3] Australian banks (ANZ the one to watch) — CLSA (20 Jun 2025) — 607962478LinqAlpha.PDF (target price table)
[4] Australian banks (ANZ the one to watch) — CLSA (20 Jun 2025) — 607962478LinqAlpha.PDF (sector outlook)
[5] Australian banks (ANZ the one to watch) — CLSA (20 Jun 2025) — 607962478LinqAlpha.PDF (CBA: Underperform thesis)
[6] CBA – U-PF (Solid but headwinds to increase) — CLSA (12 Feb 2025) — 607950441LinqAlpha.PDF (downgrade language)
[7] CBA – U-PF (Solid but headwinds to increase) — CLSA (12 Feb 2025) — 607950441LinqAlpha.PDF (NIM headwinds)
[8] CBA – U-PF (Continues to deliver but soft outlook) — CLSA (14 May 2025) — 607959409LinqAlpha.PDF (3Q25 review)
[9] CBA – U-PF (Continues to deliver but soft outlook) — CLSA (14 May 2025) — 607959409LinqAlpha.PDF (replicating portfolio)
[10] CBA – HLD (Solid earnings trends hold) — CLSA (13 Nov 2024) — 607944223LinqAlpha.PDF (prior Hold rating)
[11] CBA – HLD (Solid earnings trends hold) — CLSA (13 Nov 2024) — 607944223LinqAlpha.PDF (prior TP A$131.30)
[12] Australian Banks (Rates falling, challenges rising) — CLSA (29 Apr 2025) — 607957469LinqAlpha.PDF (sector underweight, preference order)
[13] Australian Banks (Rates falling, challenges rising) — CLSA (29 Apr 2025) — 607957469LinqAlpha.PDF (Big Four ratings table)

Note: Bits & pieces "Avoidance of Doubt" cites the Underperform stamped target as **A$167.50** as of 30 May 2025 [5]; the 20 June desk note moved the formal TP to **A$143** [3]. The downside math above uses the most recent (20 June) figure.

## Citations

- [1] **607960886LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960886LinqAlpha.PDF>
- [2] **607962478LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962478LinqAlpha.PDF>
- [3] **607962478LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962478LinqAlpha.PDF>
- [4] **607962478LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607962478LinqAlpha.PDF>
- [5] **607960886LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960886LinqAlpha.PDF>
- [6] **607950441LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607950441LinqAlpha.PDF>
- [7] **607950441LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/02/607950441LinqAlpha.PDF>
- [8] **607959409LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959409LinqAlpha.PDF>
- [9] **607959409LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959409LinqAlpha.PDF>
- [10] **607944223LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/11/607944223LinqAlpha.PDF>
- [11] **607944223LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2024/11/607944223LinqAlpha.PDF>
- [12] **607957469LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957469LinqAlpha.PDF>
- [13] **607957469LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957469LinqAlpha.PDF>

