"Commonwealth Bank of Australia (CBA.AX) operates as a major financial institution, primarily serving customers in Australia and New Zealand. The bank's core business revolves around acting as a financial intermediary, taking in money from depositors and lending it out to individuals and businesses.\n\n1. The Business Model (How They Make Money)\n\nCommonwealth Bank of Australia makes its money mainly by borrowing money from customers (like your savings in a bank account) and then lending that money out to other customers (for things like home loans, business loans, or personal loans). The difference between the interest they earn on the loans and the interest they pay on deposits is their biggest source of income. This is often called ""net interest income.""\n\nBeyond just lending, CBA also offers a wide range of other financial services. These include managing investments, providing insurance, and offering various transaction services for both individuals and businesses. They also generate income from fees charged for these services and from other financial activities.\n\nFor the financial year ended June 30, 2025, Commonwealth Bank reported a total revenue of A$28.63 billion. Their net interest income for the same period was A$24.023 billion. This indicates that the vast majority of their revenue comes from the core banking activity of lending and borrowing.\n\n2. The Metrics That Matter Most\n\nFor a bank like Commonwealth Bank, certain financial numbers are particularly important to understand its health and how well it's making money.\n\n* Net Interest Income: This is the most crucial measure for a bank. It represents the profit a bank makes from its core lending and borrowing activities – essentially, the interest it earns on loans minus the interest it pays on deposits. For Commonwealth Bank, a higher net interest income means they are effectively managing their loan and deposit rates to generate more profit from their primary business. For the financial year 2025, CBA's net interest income was A$24.023 billion.\n* Net Income: This tells you the bank's total profit after all expenses, including taxes, have been paid. It's the bottom line and a direct indicator of how profitable the bank is overall. For the financial year 2025, Commonwealth Bank reported a net income (cash net profit after tax) of A$10.11 billion.\n* Total Assets: For a bank, total assets represent the overall size of its business, primarily its loan book and investments. It shows the scale of their operations and their capacity to generate income. A growing total asset base can indicate expansion and increased lending activity. As of the financial year 2025, Commonwealth Bank had total assets of A$1,353,799 million.\n* Return on Equity (ROE): This metric shows how efficiently the bank is using the money invested by its shareholders to generate profits. A higher ROE means the bank is doing a better job of turning shareholder capital into earnings. For the financial year 2025, Commonwealth Bank's return on equity was 13.5%.\n\n3. How to Value This Company\n\nFor a bank, the most relevant valuation metric to understand if its stock is cheap or expensive is the P/E Ratio (Price-to-Earnings Ratio).\n\nThe P/E ratio compares the company's current share price to its earnings per share (how much profit it makes for each share of stock). To put it simply, it tells you how much investors are willing to pay for every dollar of the bank's annual profit.\n\nHere's why it's useful for a bank: Banks are generally stable businesses with relatively predictable earnings. The P/E ratio helps you compare CBA's valuation to its own historical P/E ratios and to the P/E ratios of other similar banks. If CBA's P/E ratio is much higher than its peers or its own history, it might suggest that investors expect strong future growth, or that the stock is currently considered expensive. Conversely, a lower P/E ratio might indicate that the stock is undervalued or that investors have concerns about its future. As of February 21, 2026, Commonwealth Bank's P/E ratio was 27.63."