This Wide-Moat Stock Has Been a Star Performer
With its record of high profitability and very strong shareholder returns, this banking firm stands out.
David Ellis: The Commonwealth Bank is one of Australia's four major wide-moat banks. It is the largest and most profitable bank in Australia, currently generating returns on equity in excess of 18%.
The wide-moat-rated Commonwealth Bank derives its moat sources from cost advantages and efficient scale. These two sources of moat provide strong competitive advantages, underlying and supporting Commonwealth Bank's long-term track record of high profitability and very strong shareholder returns.
What we like about Commonwealth Bank is not just its size, but its efficiency, its profitability, and its strong risk management capability, which equate to reasonable revenue growth based on solid lending growth. Productivity is improving, product innovation is improving, and the cost of income ratio is declining, which is a very good sign for the bank.
This bank has been a star performer, a standout performer for investors, generating total shareholder returns between 15% and 20% per year for the last 10 years and in line with our wide-moat rating. We believe that the bank will be able to continue to generate returns well in excess of its cost of capital for at least the next 10 years and more likely for 20 years.
David Ellis does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.