Why did the CBA share price underperform the other ASX 200 banks today?


The Commonwealth Bank of Australia (ASX: CBA) share price had a mixed day on Thursday.

Although the banking giant’s shares ended the day 0.2% higher at $89.75, this means they underperformed the ASX 200 and the rest of the big four.

For example, the ASX 200 rose 0.3% and the rest of the big four gained at least 0.5%, with Australia and New Zealand Banking Group Ltd (ASX: ANZ) the highlight with a 1.1% gain.

The softer performance by the CBA share price could be related to a broker note out of Morgan Stanley this week.

Due to concerns over a weaker housing and mortgage market, its analysts have taken an axe to their valuation of Australia’s largest bank.

According to the note, the broker has retained its underweight rating and cut its price target from $91.00 down to $79.00. This implies potential downside of 12% for investors over the next 12 months.

Morgan Stanley notes that Australian mortgage growth has slowed meaningfully during previous quick and aggressive rate hikes by the Reserve Bank of Australia. Unfortunately, this time it suspects that things could be even worse.

“In this cycle, we believe the slowdown will be greater given household leverage is higher than in prior cycles, mortgage rates are starting from a lower base, and cash rate hikes are likely to be larger,” the broker said.

Despite this, the broker does see value in the Westpac Banking Corp (ASX: WBC) share price. It has an overweight rating and $22.30 price target on Australia’s oldest bank’s shares.

As for the rest of the big four, its analysts have equal-weight (neutral/hold) ratings on their shares.

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