CommBank's capital stays strong despite AT1 phaseout: S&P

APRA will begin classifying AT1 instruments as Tier 2 capital starting January 2027.

Commonwealth Bank of Australia (CommBank or CBA) is expected to maintain strong capital and earnings even after the phaseout outfits additional Tier 1 (AT1) capital instruments in 2027, said S&P Global Ratings.

The Australian Prudential Regulation Authority (APRA) is phasing out AT1 instruments starting 1 January 2027. By then, APRA will begin classifying AT1 instruments issued by Australian banks as Tier 2 capital.

Following that, the Australian bank's risk-adjusted capital (RAC) is expected to fall below 10%, and hover around the 9.2% to 9.7% range, S&P said.

This is lower than the typical for a strong capital and earnings assessment, the credit rating agency said on 28 May 2026.

CBA’s RAC ratio was 10.7% as of end-December 2025.

“Nevertheless, we consider CBA's capital and earnings to be strong and in line with our current assessment, as the bank will maintain the strength and quality of its capital and earnings as AT1 instruments are phased out,” S&P said.

CBA's profitability will likely remain good by international standards, the agency said. CBA's credit losses should also remain low at about 15 basis points (bps) of customer loans.