SKN | Commonwealth Bank Shares Edge Higher After RBA Hike as Earnings Come Into Focus

Takeaways

• Commonwealth Bank shares rose modestly after the RBA delivered its first rate hike in two years, lifting the cash rate to 3.85%.
• Investors are balancing the margin upside from higher rates against risks from deposit competition and rising loan impairments.
• Attention is now firmly on CBA’s half-year results on February 11, where one-offs and credit trends will shape near-term sentiment. 

Rate Hike Provides Near-Term Support

Commonwealth Bank of Australia closed around 0.7% higher as markets digested the Reserve Bank of Australia’s decision to raise the cash rate by 25 basis points to 3.85%. The move marked the central bank’s first rate increase in two years and immediately lifted sentiment across the Australian banking sector.

CBA finished the session at A$152.57, after trading within a relatively tight range. As Australia’s largest listed lender and a heavyweight within the ASX 200, even incremental moves in CBA tend to influence broader market direction.

Earnings Loom as the Real Catalyst

While the rate decision offered short-term support, investor focus has already shifted to CBA’s half-year results due on February 11. In a pre-results update, the bank flagged several non-recurring items, including a A$68 million pre-tax provision linked to customer remediation following regulatory review, alongside A$53 million of non-recurring income.

CBA also disclosed a cash net profit after tax of A$5.12 billion for the six months to December 31 and a A$406 million loan impairment charge. These figures set the baseline for expectations, but markets will be watching closely for management commentary on margin outlook, credit quality, and cost pressures.

Margins Versus Credit Risk

Higher interest rates typically support bank earnings by widening net interest margins, but the trade-off is becoming more visible. If funding costs rise quickly or competition for deposits intensifies, margin gains may be capped. At the same time, higher borrowing costs raise the risk of increased arrears and credit losses.

The broader sector reflected this cautious optimism, with ANZ, NAB, and Westpac all posting gains on the day. However, the sustainability of the rally will depend less on the headline rate move and more on how banks reprice loans and deposits in the weeks ahead.

What to Watch Next

The immediate focus is CBA’s February 11 earnings release and webcast, where guidance on margins, bad debts, and capital management will likely drive the next leg in the share price. Beyond that, markets are already pricing a meaningful probability of another rate hike later in the year, keeping policy expectations firmly in play.

For now, CBA sits at the intersection of supportive monetary signals and rising execution risk, leaving investors finely balanced between optimism and caution.

For a confidential discussion on how interest-rate shifts, earnings quality, and capital resilience at Australian major banks can be assessed within a diversified equity and income portfolio, contact our senior advisory team.