8 October 2026
Livewire Markets recently asked four Australian fund managers which ASX companies could lose their standing as long-term compounders. Chris Scarpato, Portfolio Manager at Alvia, named Commonwealth Bank.
For three decades, the major banks have had a lot going for them. Falling interest rates, rising household incomes, expanding credit and a strong housing market created favourable conditions for lenders, and earnings and free cash flow grew with them.
Those tailwinds are now reversing. Residential property lending has become such a large driver of Big Four profits that weaker transaction volumes and falling prices should weigh on earnings and free cash flow growth over the coming years. Chris sees “material headwinds” ahead. Elevated inflation, higher interest rates, cost-of-living pressure and proposed tax changes add to the picture, and the backdrop looks very different to the one that built CBA’s record.
We’re not short the bank. Short a business of this calibre at your own risk, however, the conditions that made it such a successful compounder are no longer as favourable.