Research house Morningstar has forecast low to mid-single-digit earnings growth for Australia’s major banks over the next few years. According to Morningstar market strategist Lochlan Halloway, this subdued outlook reflects a broader challenge facing the Australian economy, where weak productivity growth is constraining potential economic expansion. The report suggests that significant earnings surges are unlikely given the current economic climate.
The Commonwealth Bank (CBA) recently experienced a sharp 10 per cent drop in its share price over just two days. Halloway noted difficulty in pinpointing the exact reason for such a dramatic sell-off, especially given the modest miss against market expectations. Analysts’ median earnings per share forecast had been revised down by approximately 1 per cent following the results, a figure that alone, according to Halloway, shouldn’t warrant such a heavy sell-off.
Morningstar suggests the sell-off in CBA shares might stem from the bank being overvalued. Halloway explained that to justify its previously high price, the bank needed to deliver exceptional results. However, CBA’s first-quarter profit growth for fiscal 2026 came in at just 2 per cent compared to the previous year. Morningstar indicated that this slow growth likely did not meet the high expectations embedded in the share price.
Commonwealth Bank is one of Australia’s largest financial institutions, providing a range of banking and financial services to individuals and businesses. Morningstar provides independent investment research and ratings.
