CBA Shares Surge as Rate Hike Expectations Boost Lender Earnings

Shares in Commonwealth Bank of Australia (CBA) surged nearly 2% on Monday as investors bet on an upcoming interest rate hike by the Reserve Bank of Australia. The bank's stock price rose to 159.90 Australian dollars, up 2.65 dollars or 1.69%, on the ASX.

The gains in CBA shares were part of a broader rally in Australia's major lenders, with Westpac, ANZ, and National Australia Bank also seeing increases of between 1.5% and 2.1%. The bank stocks helped offset weaker performance from materials stocks, keeping the benchmark ASX 200 from falling further.

The shift in interest rate expectations was driven by Morgan Stanley's prediction that the Reserve Bank will raise its official cash rate at its next meeting on September 29, forecasting a 25-basis-point increase to 4.6%. This would be favorable for bank earnings as lenders typically benefit from wider margins between borrowing and deposit rates when official rates climb.

Commonwealth Bank's performance has been strong, with the lender reporting a record fiscal 2026 cash profit of A$11 billion, up 7% year-over-year. However, analyst sentiment remains divided, with Goldman Sachs' Brendan Sproules initiating coverage with a sell rating and a price target of 130.18 Australian dollars.