Commonwealth Bank of Australia (CBA)

 By Jason Fittler

Commonwealth Bank of Australia (CBA) announced that it has reached an agreement with John Symond to increase its investment in Aussie Home Loans initially from 33% to 80%, with the right to subsequently move to 100% ownership.

John Symond will remain as Executive Chairman and Aussie will continue to operate as a standalone mortgage broker and financial services provider.

The acquisition of Aussie is dependent on the Commonwealth Bank obtaining informal clearance from the Australian Competition and Consumer Commission (ACCC). The financial terms of the acquisition are confidential. However, the transaction is not material to the Commonwealth Bank.

CBA gained 16 cents (0.26%) to $61.45.

Back in August this year I wrote that we can expect to see banks continue to move up as investors chase the yield give the falling cash rate.

Now some five months later CBA has moved up from $56 to $62, which is a move of just under 11% the yield is currently a gross of 8.7% and the price has returned to 2007 highs.

Granted the above announcement is a positive, for CBA, if they can get ACCC approval. But at the current price I would look to take some profit out of this company.

If you compare CBA to the other three major banks, (which are currently down on recent highs) it looks at best fully priced.

In volatile markets like this it makes sense to lock in profits. However, there is no need to wholesale out.

What makes sense with CBA is to simply reduce your exposure and re-weight this company in your portfolio.

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