Commonwealth Bank of Australia

The Piotroski F-Score is built for industrial firms — gross margin, the current ratio and asset turnover are meaningless for a bank whose balance sheet is itself a book of financial assets. In its place we use a nine-point, CAMELS-inspired check spanning capital, asset quality and earnings/funding.

It deliberately captures asset quality (credit risk) — historically the dominant driver of bank failure and otherwise absent from the five scoring pillars. A 6/9 result places Commonwealth Bank in the "Sound" band: capital, liquidity and returns are all robust and the bank clears its cost of equity with room to spare, but three criteria fail — all reflecting a normalising credit cycle at FY26. Non-performing exposures edged just above 1.00% of gross loans (1.02%), the loan-impairment charge rose (A$726m → A$788m) as the bank lifted its downside-scenario weighting, and the loan-to-deposit ratio sits above 100% (structurally normal for an Australian major that supplements its large, 79% deposit base with wholesale funding). Provision coverage was nonetheless maintained (total provisions A$6.5b; 58% of non-performing exposures), so these are early-cycle signals rather than deterioration in the balance sheet's resilience.

Measures how fast the bank's income and balance sheet are expanding — operating income, customer deposits and gross loans, year-on-year. Commonwealth Bank scores at the ceiling in FY26: operating income grew +6.2% to A$30.2b, customer deposits rose +7.8% to A$980b, and gross loans grew +7.1% to A$1,084.9b — home lending grew ≈1.0× system and business lending ≈1.3× system. Every growth metric clears its green threshold, and neither loan segment breaches the 1.5×-system over-extension trigger.

Captures how efficiently the bank turns its franchise into profit — return on equity, the cost-to-income ratio, and net interest margin. This is Commonwealth Bank's standout pillar and the best of the majors: ROE of 14.0% (vs WBC 10.0%, +50bps on FY25), a sector-leading cash cost-to-income ratio of 45.5% (44.9% ex-notables), and a net interest margin of 2.05% that holds the 2.00% line despite mortgage competition. ROE and NIM are capped at 100; the reported cash CTI ticks just into the amber band, scoring 95.

The regulator-facing safety metrics — CET1 capital, the Liquidity Coverage Ratio and the Net Stable Funding Ratio. Commonwealth Bank is fortress-like at 30 Jun 2026: CET1 of 12.0% (Level 2; 12.3% a year earlier), LCR 132% (Jun-26 quarter average), and NSFR 115% — all three at or above their green thresholds. Total Capital sits at 20.8% and the leverage ratio at 4.6%.

The income case — cash yield plus the franking credits that matter so much to Australian residents and SMSFs. This is the franchise's weak point as an income holding: the FY26 cash yield is only ≈3.25%, grossing up to ≈4.64% fully franked — the lowest of the major banks and only marginally inside the amber bands. The dividend itself is well-covered (payout ≈77% of cash NPAT) and the final was lifted 10c to A$2.70 (full-year DPS A$5.05); the low yield is a price problem, not a payout problem.

Whether the shares are cheap or expensive — price against book value, tangible book, earnings, deposits and a dividend-discount model. Commonwealth Bank is the most expensive major bank in the world: 3.30× book, 3.70× tangible book and ≈23.7× cash earnings — all in the red band, roughly double the peer median even after an ≈8.5% de-rating over the year. Only the price-to-deposits multiple offers any relief. The Gordon-growth DDM implies an intrinsic value near A$78, half the market price, which is why this pillar is the binding constraint on the score.

A separate nine-point health check covering capital, asset quality and earnings/funding — the bank-specific replacement for the Piotroski F-Score. It is shown alongside the composite, not blended into it, and it surfaces credit-risk signals the five pillars do not. At FY26 Commonwealth Bank passes all three capital tests but fails three: non-performing loans just above 1.00% of gross loans, a rising impairment charge, and a loan-to-deposit ratio above 100% — a normalising credit cycle, with provision coverage nonetheless maintained.

Normalisation. Higher-better: score = clamp((v − red_floor)/(green_ceiling − red_floor),0,1)×100. Lower-better: score = clamp((red_ceiling − v)/(red_ceiling − green_floor),0,1)×100. Band metrics (loan growth, payout): full score inside the green band, declining to the red boundaries. DDM: clamp((upside + 0.30)/0.60,0,1)×100. All five pillars are weighted equally at 20%.

Growth (100.0). G1 Op-income +6.2% → 100 (clears the 6% green ceiling). G2 Customer deposits +7.8% → 100. G3 Gross loans +7.1%, inside the 4–9% green band → 100. Home lending grew ≈1.0× system and business lending ≈1.3× system; both below the 1.5× over-extension trigger, so no asset-quality flag is raised despite the above-system business growth.

Profitability (98.3). P1 ROE 14.0% → 100 (above the 13% green ceiling). P2 cash CTI 45.5% → 95 (just into the 45–55% amber band; on an ex-notables underlying basis of 44.9% it would round to 100). P3 NIM 2.05% → 100 (above the 2.00% green ceiling). Average = (100 + 95 + 100)/3 = 98.3. Reported on a cash / continuing-operations basis.

Capital & Liquidity (100.0). C1 CET1 12.0% → 100 (major-bank thresholds: red 10.25 / green 11.5; CET1 eased −30bps from 12.3% a year earlier as RWA grew to A$522b). C2 LCR 132% → 100. C3 NSFR 115% → 100 (at the green floor). Total Capital 20.8%, leverage ratio 4.6% and total provisions of A$6.5b reinforce the fortress reading.

Dividends (9.05). Cash yield = A$5.05 ÷ A$155.46 = 3.25% → 12.45 (inside the 3–5% amber band). Gross (franked) yield = 3.25% × (1 + 1.00 × 0.30/0.70) = 4.64% → 5.64 (just inside the 4.5–7% amber band). Average = 9.05. Payout ≈77% falls in the 75–85% amber band, attracting a sustainability caveat but no hard cap (the cap only binds above 85%). This remains the structurally weakest pillar and the defining feature of CBA as an income proposition — the lowest yield of the Big Four, a direct arithmetic consequence of the premium price rather than any dividend weakness (the final was in fact lifted 10c to A$2.70).

Valuation (9.0). P/B 3.30× → 0; P/TBV 3.70× → 0; P/E(cash) 23.7× → 0 — all three multiples sit far beyond their red ceilings. V4 (structural): P/D 0.265× → 90.0 and P/A 0.179× → 0 (avg 45.0). DDM (V5 = 0): r = rf + β·ERP = 5.01% + 0.85×5.75% = 9.90%; g = ROE×(1−payout) = 14.0%×0.23 = 3.22%; D₁ = 5.05×(1+g) = A$5.213; V = D₁/(r−g) = 5.213/0.0668 = A$78.04; upside = (78.04−155.46)/155.46 = −49.8% → 0. Average of the five components = (0 + 0 + 0 + 45.0 + 0)/5 = 9.0. Sensitivity: a ±50bps move in g shifts intrinsic value to roughly A$84.8 / A$72.2; even on the most generous reasonable assumptions the DDM cannot reconcile to the A$155 price. The model directionally confirms extreme over-valuation rather than precise fair value. β (0.85) and ERP (5.75%) are held constant from the prior CBA report for peer comparability; only the risk-free rate is refreshed (4.75% → 5.01%).

Composite. 0.20×(100.0 + 98.3 + 100.0 + 9.05 + 9.0) = 20.00 + 19.67 + 20.00 + 1.81 + 1.80 = 63.3 → MODERATE. No pillar excluded; no weight redistribution required. The result mirrors Westpac's ≈61 but is inverted in composition: WBC scores moderately across all five pillars, whereas CBA pairs three near-perfect operating pillars with two price-crushed pillars.

Peer set. Australian major banks — WBC, NAB, ANZ. CET1 median ≈12.3%; ROE median ≈10.0% (CBA 14.0 leads decisively); P/B median ≈1.67× (CBA 3.30 is roughly double); P/TBV median ≈1.95× (CBA 3.70); P/E median ≈16.5× (CBA 23.7); gross yield median ≈5–6% (CBA 4.64 trails). A generic GICS-sector median is inappropriate for banks because business mix changes benchmark values.

Cash vs statutory reconciliation (FY26, continuing operations). Statutory NPAT A$10,911m; less non-cash items — transaction costs and gains/(losses) on disposals A$(17)m and hedging / IFRS volatility A$(54)m — gives cash NPAT A$10,982m (cash is A$71m above statutory because divestment and hedge items were net losses in the statutory line). ROE, EPS and CTI are scored on this cash / continuing-operations basis per Australian broker convention. 3σ outlier capping: no metric required capping in this report.

Commonwealth Bank reports on a June fiscal year. This report is built on the FY26 full-year result (year ended 30 June 2026), released in August 2026, which supersedes the 1H26 (Dec-25 half) and 3Q26 (Mar-26 quarter) figures used in the prior edition. All income-statement, margin, return, dividend, capital, liquidity, asset-quality and balance-sheet metrics are therefore drawn from the primary FY26 disclosures — the 2026 Annual Report, the FY26 Full-Year Basel III Pillar 3 report and the FY26 Full-Year Results Presentation — and are dated 30 June 2026. Every CBA data row in this report is Current; none is stale. Capital and liquidity figures (CET1 12.0%, LCR 132%, NSFR 115%) are the freshest available, as banks disclose these only at half-year and full-year. Market price (A$155.46, 25 Aug 2026) and the risk-free rate (10-year Commonwealth Government bond 5.01%, 26 Aug 2026) are current to the generation date.