CBA at $160: The Most Expensive Illusion in Global Finance?

Is there a gravitational anomaly currently affecting the corner of Martin Place and Pitt Street? If you’ve been watching the ticker tape for Commonwealth Bank (CBA) lately, you’d be forgiven for thinking the laws of financial physics have been suspended. We are looking at a bank that hit a dizzying $192 last year and, even after a recent "correction" to the $160 range, remains the most expensive lender in the developed world.

Let’s be brutally honest: this numbers game doesn’t add up.

While the rest of the market obsesses over AI chips and lithium mines, the humble yellow logo continues to command a premium that would make a tech start-up blush. We are talking about a traditional mortgage lender trading at multiples that suggest it has discovered cold fusion in its basement vaults.

The "Teflon" Valuation

Here is the reality check nobody wants to hear: CBA is trading at a Price-to-Earnings (P/E) ratio of roughly 26x. Does that sound high? It should. It is astronomically high. For context, the global banking sector usually trades in the boring, predictable teens.

Why does this matter? Because you are paying a Lamborghini price for a (very reliable) Toyota Camry. The bank’s earnings are growing, yes, but at a polite, single-digit pace (roughly 4%). The share price, however, suggests exponential growth that simply doesn't exist in the saturated Australian mortgage market.

The Superannuation "Cheat Code"

So, if the fundamentals don't support the price, what is keeping this balloon afloat? The answer lies in your pay slip. The relentless flow of compulsory superannuation money—now 12% of wages—creates a mindless buying machine.

Because CBA makes up such a massive chunk of the ASX 200 index (over 10% historically), every index fund and passive ETF must buy it, regardless of the price. It is a self-fulfilling prophecy: money flows in, the stock goes up, the weighting increases, and the funds must buy even more.

The Retail fortress

There is another layer to this fortress: the "Mum and Dad" investor. For millions of Australians, CBA isn't just a stock; it's a proxy for the national economy. It feels safer than gold. When the price dips (like the recent slide from $192), retail investors don't panic—they double down. They see a discount, not a warning sign.

But safety can be an expensive illusion. If global markets sneeze, or if Australia’s employment numbers take a genuine hit, that premium valuation leaves zero margin for error. A stock priced for perfection cannot afford a single imperfect quarter.

Is CBA a bad bank? Absolutely not. It is arguably the best-run bank in the southern hemisphere. But is a Gucci handbag worth ten times a regular leather bag? The market says yes, for now. But fashion changes, and in finance, gravity eventually wins.