He is not the only one under pressure. The analysts who have placed a sell on CBA due to its out-of-whack fundamental value will be feeling the heat from the bank’s high share price, and some could eventually cave and change their recommendation to neutral or even buy. Doing so would risk them catching a falling knife.

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Citi’s Brendan Sproules admits that analysts have historically been “horrific” at predicting the CBA share price, and the past six months, he says, have been no different.

At CBA’s current price of 2.6 times its book value, it is trading at a 100 per cent premium to its major bank peers. Pre-COVID, this used to be what Sproules describes as a “mild” 40 per cent premium.

It even now has a dividend yield that is skinnier than the risk-free rate (or the 10-year government bond rate). Sproules posits that “some might think there is less credit risk with Matt Comyn than Jim Chalmers”. One guarantees your capital, and it isn’t Comyn.

UBS attacks the decoupling of share prices of banks from their fundamentals in a different, and perhaps novel way.

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It notes the recent strength in bank shares reflects the newfound optimism around softer inflation, interest rate cuts and a benign credit cycle.

But it introduces a new factor to explain CBA’s runaway share price: what investors are willing to pay for market share.

UBS compares the Commonwealth Bank to US bank JP Morgan. “Both banks, on this metric, market capitalisation to/total system assets, are at about 70 per cent premium to peers, implying CBA’s valuation might not be as stretched as the market perceives.”

This also requires UBS to detach the CBA valuation from the traditional measures such as return on equity and discounted cash flow.

Sproules, however, says CBA is close to one of the most expensive banks in the world and is expensive even by its own lofty standards.

The valuation could be better justified next week if the bank delivers expected softer earnings but a better dividend.

Contortions aside, CBA appears to be the happy recipient of its size – or its sizable weighting in the Australian index.

Its large index weighting draws passive buying. According to Citi, For every $10 flowing to passive products, nearly $1 by default goes to CBA. This then becomes self-fulfilling.

To be fair, CBA is a very strong and well-run franchise whose ownership is strongly populated by retail investors.

But with pressure on its net interest margins, and without strong credit growth, its current share price strength is hard to fathom.

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