(Bloomberg) -- The gap between Commonwealth Bank of Australia’s current share price and analysts’ expectations is pointing to the weakest return potential among global banking stocks.

Researchers see shares of Australia’s largest company tumbling 26% in the next 12 months, the steepest projected drop among MSCI World Bank Index members, according to consensus price targets compiled by Bloomberg. Brokers are wagering the stock will slide on long-cited valuation concerns and intense competition.

“CBA is now vying for the title of world’s most expensive developed market bank at levels it’s been historically unable to sustain,” said Matt Ingram, senior industry analyst at Bloomberg Intelligence. “Its re-rating might reflect its improving profit outlook for 2025, but seems contrary to the growing rate-induced headwinds from 2026 onwards.”

Commonwealth Bank did not respond to requests for comment.

The lender’s valuation has been an ongoing sticking point for analysts. The stock drove gains on Australia’s S&P/ASX 200 Index last year and notched a string of record highs, even without a single buy rating from brokers.

While bleak quarterly results from Australian peers last month helped trim its valuation, Commonwealth Bank remains one of the most expensive bank shares globally. The stock trades at 25 times forward earnings, almost double JPMorgan Chase & Co.’s multiple.

“The banks’ latest results were not good enough to meet lofty expectations or to support elevated trading multiples,” Morgan Stanley analysts led by Richard E Wiles wrote in a note dated March 3. “We retain our negative stance on the major banks and expect them to underperform” Australia’s benchmark in 2025. CBA is up 0.2% this year, while the ASX 200 is down 0.8%.

Increasing competition is also weighing on the stock’s outlook. All of Australia’s four biggest banks agreed to lower mortgage rates after the central bank in February delivered its first interest rate cut since 2020. That’s expected to add pressure on margins.

Commonwealth Bank last month reported first-half profit that met analyst estimates amid strength in its key home lending business, sending its shares to a record high. Net interest margins were better than expected amid a drop in low-yielding liquid assets, according to analysts.

While investors generally remain bullish on the stock, they’re taking precautions: The cost of three-month options hedging against swings in CBA shares hit an almost five-year high relative to ASX 200 contracts last week, with the spread still above its one-year average. The ratio of outstanding bearish-to-bullish bets has climbed to its highest level since February 2021.

Meanwhile, short interest on the shares is around the lowest level in about two years, according to data from the Australian Securities & Investments Commission.

--With assistance from Cecile Vannucci and Harry Brumpton.