Commonwealth Bank suffers its biggest share plunge on record in $25billion bloodbath following Budget - and other banks could follow

By ASHLEY NICKEL, NEWS REPORTER, AUSTRALIA and AAP Published: 15:19, 13 May 2026 | Updated: 15:22, 13 May 2026 Australia's largest bank's share price has plummeted after it raised its cash buffers to cushion it from bad loans in the event the economy goes into downturn as a result of the Middle East conflict. Commonwealth Bank had more than $25billion wiped off its value on Wednesday in its worst single-day loss ever, exceeding plunges at the outset of the Covid pandemic and the global financial crisis.  The bank said it had raised its credit provisioning level by $200million to $6.5billion, affecting its bottom line. It still made $2.7 billion profit in the March quarter, but it was about two per cent less than what analysts had expected. The dumping of shares was likely helped along by the release of the Federal Budget on Tuesday night, which included changes to negative gearing and capital gains tax to discourage investment properties. The two key Budget changes to investor taxation is expected to result in less investment lending, meaning less bank earnings. And it seems the country's biggest lender was not the only Australian bank to feel the toll of the announcements.  While CBA's share prices fell 10.4 per cent to $153.67, Westpac also dropped 2.8 per cent to $35.57, ANZ 1.6 per cent to $34.57 and NBA 1.5 per cent to $36.86. Under Labor's changes, only those with existing negatively geared properties or who build new homes on vacant land will be entitled to claim their expenses. Negative gearing allows owners of investment properties to claim back their costs - like interest on loans, maintenance and rates. Australian banks recorded a plunge in share value following the release of the Federal Budget (pictured is Treasurer Jim Chalmers) Commonwealth Bank share prices fell 10.4 per cent to $153.67, the largest fall recorded in its history The changes to the capital gains tax, applied to the profit made from selling assets, paid as part of income tax, will replace a current 50 per cent discount with indexation. The original price of a property adjusted for inflation, then tax charged on the sale profit compared to the inflated price. That will come into effect alongside a minimum 30 per cent tax on gains from July 1, 2027. Citi banks analyst Tom Strong said the two budget changes made mortgage credit riskier to investors. Instead, Australians will likely look to make improvements to their current homes.  'From a tax perspective, incremental investment into primary residences looks more attractive given tax-free capital gains and the loss of negative gearing for investment properties,' Mr Strong told The Australian.  However, the reaction to Tuesday's Budget is especially bad news for CBA. The bank also recorded its highest number of people behind on personal loan repayments since 2019.  VanEck senior portfolio manager Cameron McCormack said the news from Commonwealth Bank was indicative of a broader market trend. Experts warned the share drop was likely the beginning of issues for banks as investing shrinks and loan holders falter on repayments 'We are starting to see early signs of stress emerge more broadly,' he said, noting the banks were dealing with inflation and higher interest rates as well as fallout from the Middle East war.   'Arrears are edging higher across personal loans, home loans and credit cards, while total provisioning has risen to $6.5 billion. Importantly, this is not isolated to CBA.' 'Provisioning has been stepping up across the major banks this reporting season, which is consistent with the cumulative impact of restrictive monetary policy beginning to bite.' Mr McCormack added the drastic drop in share value was 'the first of a series of warning bells for the sector'. Citi analysts said the CBA's earnings were a miss to forecasts because of the 'modest' provisioning top-up, but its core earnings drivers and underlying credit looked consistent with expectations. CBA indicated its operations had been running smoothly, with operating income and underlying net interest margin broadly stable in the three months to March 31. The bank said it had, however, revised its macroeconomic forecasts and increased its weighting of a downside scenario for Australia's economy. 'Notwithstanding an already strong level of provisioning, we have chosen to further top up our collective provisions in the quarter to reflect heightened macroeconomic risks,' chief executive Matt Comyn said. Changes in the Budget were designed to shift the economic advantage from property investors to first home buyers 'Our deliberate and long-term approach to balance sheet settings enables us to support our customers and the economy.'  The country's other major banks have also set aside hundreds of millions more in cash for credit provisioning, the buffer that banks set aside to protect from loan defaults, because the US-Israeli war on Iran has disrupted supply chains and caused sharply higher fuel costs. Commonwealth Bank's actual loan losses have thus far been small.  Just $6.5 billion in corporate lending was flagged as 'troublesome and non-performing', as of March 31, representing 0.94 per cent of its total committed exposure. That is slightly more than the $6.1 billion in the December quarter, but less than the $6.6 billion a year ago. In retail lending, the percentage of consumers more than 90 days behind on their personal loans grew to 1.71 per cent, the highest level in since before the pandemic, but CBA said this reflected deliberate decisions by the bank involving credit, pricing and acquisition mix. The percentage of consumers behind on their home loans and credit cards remained low and broadly stable from previous quarters, at 0.69 per cent and 0.68 per cent, respectively. Australia's economy was demonstrating resilience, but supply chain disruptions, higher prices and interest rates are expected to weigh on household spending and business activity, Mr Comyn said. 'We will continue to adjust our settings as appropriate and remain focused on executing our strategy,' he said. No comments have so far been submitted. Why not be the first to send us your thoughts, or debate this issue live on our message boards. By posting your comment you agree to our house rules. 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