How you can value the CBA share price

Core Viewpoint - The Commonwealth Bank of Australia (CBA) is a leading financial institution in Australia, with significant market shares in various lending categories and a strong focus on workplace culture and profitability metrics. Group 1: Market Position and Customer Base - CBA is Australia's largest bank, holding over 20% market share in mortgages, 25% in credit cards, and a substantial portion in personal loans, serving over 15 million customers primarily in Australia [2]. - The bank is deeply integrated into the Australian payments ecosystem and financial marketplace, indicating its entrenched position in the industry [2]. Group 2: Workplace Culture - A positive workplace culture is essential for long-term success, as it aids in retaining high-quality personnel, which can lead to improved financial performance [3]. - CBA's workplace culture rating is 3.4 out of 5, surpassing the ASX banking sector average of 3.1, suggesting a relatively favorable employee environment [4]. Group 3: Profitability Metrics - The net interest margin (NIM) is a critical measure of CBA's profitability, with the bank achieving a NIM of 1.99%, higher than the ASX major banks' average of 1.78% [6]. - CBA earned 85% of its total income from lending activities last year, highlighting the importance of lending in its revenue generation [7]. - The return on equity (ROE) for CBA was 13.1%, significantly above the sector average of 9.35%, indicating strong profitability relative to shareholder equity [8]. Group 4: Capital Structure - CBA's common equity tier one (CET1) ratio was 12.3%, exceeding the sector average, which provides a buffer against financial instability [9]. Group 5: Dividends and Valuation - The total dividend for CBA last year was $4.65, with projected growth rates between 2% and 4% leading to various share price valuations based on a dividend discount model (DDM) [11][12]. - The average valuation of CBA shares using a simple DDM model is estimated at $98.33, while an adjusted valuation based on forecast dividends is $100.66, compared to the current share price of $169.34 [12]. - A gross dividend payment valuation, which includes franking credits, suggests a fair value of $143.80, indicating that the current share price may appear expensive [12].