Commonwealth Bank Shares Rise Nearly 2 Percent as Banks Lead ASX Higher on Rate Hike Expectations

Shares of Commonwealth Bank of Australia rose nearly 2% Monday, leading gains across the country’s major lenders even as the broader share market struggled following renewed U.S. military action against Iranian targets in the Strait of Hormuz.

The stock traded at 159.90 Australian dollars, up 2.65 dollars, or 1.69%, on the Australian Securities Exchange. Commonwealth Bank’s advance came alongside similar gains of between roughly 1.5% and 2.1% for the country’s other major banks, including Westpac, ANZ and National Australia Bank, which together helped offset a weaker session for materials stocks and kept the benchmark ASX 200 from falling further, according to live markets coverage from ABC News.

Monday’s rally in bank stocks coincided with a notable shift in interest rate expectations. Morgan Stanley said in a research note that it now expects the Reserve Bank of Australia to raise its official cash rate at its next meeting on Sept. 29, forecasting a 25-basis-point increase to 4.6%. The investment bank’s Australian strategy team said stronger-than-expected July inflation data had “crystallised upside risks” the central bank had previously flagged, adding that the latest inflation print “meets the threshold for the ‘upside risks’ to inflation the RBA flagged at its August meeting and said it would act against.” Rising interest rates are generally viewed favorably for bank earnings, since lenders typically benefit from wider margins between the rates they charge borrowers and the rates they pay depositors when official rates climb.

The gains in bank shares came even as the broader ASX 200 struggled for direction Monday, weighed down by U.S. strikes on two Iranian rocket launchers on Larak Island in the Strait of Hormuz overnight, an action that rattled equity markets across the Asia-Pacific region and pressured resource-heavy sectors including materials, where major miners BHP and Rio Tinto both traded lower.

Commonwealth Bank’s share price gain builds on a period of record financial performance for Australia’s largest bank by market capitalization. The lender reported fiscal 2026 cash profit that rose 7% to a record 11 billion Australian dollars, according to Morningstar, with loan growth of 7% and steady net interest margins more than offsetting a 6% rise in operating expenses and a modest increase in loan impairment costs. The bank’s common equity tier 1 capital ratio, a key measure of financial strength, stood at 12.3%, and it lifted its interim dividend to 2.35 Australian dollars per share during the year.

Analyst sentiment on Commonwealth Bank has remained notably divided given the stock’s strong run over the past year. Goldman Sachs analyst Brendan Sproules initiated coverage of the bank with a sell rating and a price target of 130.18 Australian dollars, a level well below where the stock currently trades, reflecting concerns among some analysts that the bank’s valuation has become stretched relative to its growth prospects. Commonwealth Bank’s shares have traded in a 52-week range between roughly 146.98 and 185.59 Australian dollars, and the stock currently carries a price-to-earnings ratio of about 25.3, a premium valuation compared with many of its banking peers both domestically and internationally.

Commonwealth Bank operates across several core segments, including retail banking, business banking, institutional banking and markets, and a New Zealand division, offering products ranging from home loans and consumer finance to specialized services for business, agribusiness and high-net-worth private banking clients. The bank has continued to emphasize investment in technology and artificial intelligence tools as part of its broader strategy, alongside a series of asset divestments in wealth management and insurance in recent years aimed at sharpening its focus on core banking operations.

Despite Monday’s gains, the broader session underscored how closely tied Australian equity markets remain to developments overseas, with Middle East tensions weighing on resource stocks even as domestic factors, including shifting interest rate expectations, provided support for the financial sector. Investors are expected to continue watching both fronts closely in the coming days, alongside upcoming domestic economic data, including second-quarter GDP and July trade figures, that could further shape expectations ahead of the Reserve Bank’s September policy meeting.