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Investing.com - UBS has reiterated its Sell rating on Commonwealth Bank of Australia (ASX:CBA) (OTC:CMWAY) with a price target of AUD125.00.
The investment bank maintains its negative stance on CBA shares based on valuation concerns, despite acknowledging potential productivity gains and cost reductions as key areas to monitor.
UBS specifically analyzed whether technology partnerships and investments could drive stronger-than-expected earnings improvements for the Australian banking giant.
The analysis focused on whether CBA could achieve absolute cost reductions sufficient to lower its cost-to-income ratio below 40%, which UBS considers necessary to justify the bank’s premium valuation.
UBS concluded that Commonwealth Bank is unlikely to reach this cost-to-income benchmark in the near term, though its analysis revealed several strategic cost-reduction options available to management that are not immediately apparent from conventional sources.
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