Commonwealth Bank of Australia (CBA) leaves A$700m of its buyback unused despite record profit

Commonwealth Bank of Australia (ASX: CBA) has just delivered A$10.98 billion of cash net profit after tax, raised its full-year dividend to A$5.05 per share and finished June with a 12.0% Common Equity Tier 1 capital ratio. Yet one form of shareholder return was conspicuously absent: the bank repurchased no shares during FY26 and will allow the unused A$700 million portion of its longstanding A$1 billion on-market buyback to expire on August 12 without an extension.

Only A$300 million of the programme has ever been completed, meaning 70% of the authorised amount is disappearing unused. That decision becomes particularly interesting when viewed against the price at which Commonwealth Bank of Australia previously bought its own stock. The completed repurchases covered 2,706,964 shares at an average price of A$110.72, according to the FY26 profit announcement.

CBA closed August 12 around A$172.72, approximately 56% above that average repurchase price. The bank has not said that valuation alone caused it to abandon the remaining buyback, but the combination of a much higher share price and substantial capital being absorbed by lending growth makes the decision worth examining separately from the headline earnings result.

How much less would A$700m buy today than at CBA’s earlier repurchase price?

The difference is substantial. At the A$110.72 average price paid for the completed portion of the programme, A$700 million could theoretically have retired about 6.32 million shares. At A$172.72, the same cash would buy only around 4.05 million shares, ignoring transaction costs and market-price movements.

In other words, Commonwealth Bank of Australia would retire approximately 36% fewer shares for the same A$700 million expenditure at the August 12 price than it could have at the average price of its earlier purchases.

That does not establish that CBA shares are overvalued or that management considers them expensive. It does illustrate why buyback economics change as a share price rises. The bank’s current market capitalization is about A$289 billion, meaning the remaining A$700 million authorisation represents only around 0.24% of equity value.

The unfinished programme would therefore have only a modest effect on today’s share count even if fully executed.

Where did Commonwealth Bank of Australia deploy capital instead?

The FY26 results provide a strong clue. Commonwealth Bank of Australia said it deployed 72 basis points of capital into credit risk-weighted assets during the year, driven by strong volume growth particularly in commercial lending and Australian residential mortgages. Its CET1 ratio finished June at 12.0%, down 30 basis points from June 2025 but still well above the Australian Prudential Regulation Authority minimum requirement of 10.25%.

That leaves a regulatory buffer of approximately 175 basis points, so the bank is hardly capital constrained. The more important point is that profitable balance-sheet growth is competing with buybacks for capital.

Commonwealth Bank of Australia grew at or above system across all five of its core domestic categories during FY26, including home lending, business lending, consumer finance, household deposits and business deposits. Management said this was the first time CBA had achieved that breadth of system-plus growth and the first time any major Australian bank had done so in 15 years.

If management believes additional lending can generate attractive risk-adjusted returns, retaining capital for franchise growth can compete effectively with repurchasing shares, particularly when the stock is trading substantially above previous buyback levels.

Why has Commonwealth Bank of Australia not abandoned shareholder returns?

The unused buyback should not be confused with a retreat from capital distributions. Commonwealth Bank of Australia raised its final dividend to A$2.70 per share, taking the FY26 dividend to A$5.05, up 4%. The full-year payout ratio was 77% of cash profit, comfortably within management’s target range of 70% to 80%.

The bank also said it returned A$8.3 billion to shareholders during FY26 through the dividends actually paid during the period. Its Dividend Reinvestment Plan for the latest dividend is expected to be satisfied through on-market share purchases rather than new share issuance, preventing the programme from mechanically expanding the equity base.

Commonwealth Bank of Australia is therefore still distributing most of its annual earnings while directing incremental capital toward balance-sheet growth rather than completing a buyback first announced in August 2023.

Does the abandoned A$700m buyback reveal capital discipline?

There is a useful historical comparison. When Commonwealth Bank of Australia reported its first-half results, it estimated that completing the remaining A$700 million buyback would reduce its CET1 ratio by approximately 14 basis points. At that stage, management still presented completion as an available capital-management option dependent on market conditions and other considerations.

Six months later, the bank has explicitly decided not to extend the programme. Meanwhile, CBA’s share price has climbed far above the A$110.72 average level at which the completed A$300 million was repurchased, while additional credit growth continues to absorb regulatory capital.

It would be too strong to conclude that management is signalling its own shares are expensive because Commonwealth Bank of Australia has not given that explanation. A more defensible interpretation is that the relative attractiveness of the buyback has diminished while alternative uses of capital have remained available.

That creates an interesting counterpoint to a record-profit year. Commonwealth Bank of Australia had enough earnings and capital strength to increase dividends, invest A$2.43 billion in technology and other capabilities, and continue expanding lending. What it did not do was chase the final A$700 million of an old buyback simply because the authorisation existed.