Why Commonwealth Bank’s Share Price Is Down: More Debt

At time of writing, Commonwealth Bank of Australia [ASX:CBA] is down 1.4% today, trading at $67.99.

It has been a bad year for the stock, falling from a closing high of $82.19 on January 9th, to today’s price in a 17% loss.

It’s also been a bad day for the other Big Four banks, with National Australia Bank Ltd [ASX:NAB] down 0.9%, Australia and New Zealand Banking Group [ASX:ANZ] down 1.3%, and Westpac Banking Corporation [ASX:WBC] down 1%.

NAB recently announced a 14% fall in its full-year profits.

CBA is one of the five fatal stocks we detail in this free report. Download here to get the names.

Commonwealth Bank announces new debt measure

CBA announced yesterday that it would issue debt via a hybrid capital notes offer to raise about $750 million.

The proposed offer would have a face value of $100 and carry a margin between 3.70% and 3.90%.

In March, CBA made a similar move, raising about $1.25 billion.

A hybrid capital notes are a type of investment that have elements of both debt and equity.

They pay a fixed or floating rate of interest like bonds, but unlike a bond the amount and timing of the payments are not guaranteed.

An additional factor potentially driving the CBA share price down is the announcement that it is selling its Colonial First State Global Asset Management (CFSGAM) to Mitsubishi UFJ Trust and Banking Corporation.

The sale will generate $4.1 billion.

Where will CBA’s share price go from here?

No doubt the royal commission is taking its toll, and CBA shares have been on a downward trend for the year as seen below:

CBA Share price

Source: marketindex.com.au

The commission has recently released an interim report and its final report is due in February 2019.

The stock has traditionally been seen as an income stock because of its strong dividend yield.

However pressure is mounting on it, along with the prospect of a looming credit crunch.

Given these factors, perhaps a stock to steer clear of for the foreseeable future.


Lachlann Tierney,
For Markets & Money

PS: Along with CBA, there are four other fatal stocks to avoid in our detailed free report. Get the names here.

Lachlann Tierney is a writer for Markets & Money. He has lived and studied in the US, the UK, and Australia. With an MSc from London School of Economics (LSE) he brings a strong grasp of geopolitics and world affairs to his analysis. Lachlann is always on the lookout for the news that will give you an edge in tomorrow’s markets.

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