The strong rise in the Commonwealth Bank of Australia's (ASX: CBA) share price has attracted the attention of one of its biggest shareholders.

As the chart below shows, the CBA share price has risen close to 40% in the past 12 months. That's significantly stronger than the S&P/ASX 200 Index (ASX: XJO) capital growth of 12% in the same time period.

The Australian Foundation Investment Co Ltd (ASX: AFI), or AFIC, is a listed investment company (LIC) that holds a swathe of CBA shares.

AFIC's portfolio is actively managed, with a long-term focus on the fundamentals of its individual company holdings. It typically leaves its largest 'safer' ASX blue-chip share positions alone while focusing more actively on the mid-cap ASX share positions.

So, when AFIC decides to buy or sell one of the biggest businesses in its portfolio, it's worth taking notice. AFIC made an interesting disclosure when it announced its FY25 first-half result for the six months to 31 December 2024.

AFIC sells CBA shares

During the first-half period, AFIC noted that a significant amount of realised capital gains were incurred from sales "as market valuations became stretched and some portfolio positions were reduced"

The LIC revealed that the largest sale in this context was a "small proportion" of its holding in CBA shares, which amounted to $190.2 million. At 31 December, AFIC's CBA holding was worth $975 million, representing 9.7% of the overall portfolio.

AFIC also sold $35 million of Westpac Banking Corp (ASX: WBC) shares in the HY25 result, so the LIC has made a call on some of the ASX bank shares being expensive.

How expensive are Commonwealth Bank shares?

In an article I wrote yesterday, I reported that according to Factset's collation of analyst estimates (consensus), CBA shares were recently trading on a price/earnings (P/E) ratio of 26x the projected earnings for FY25.

The fund manager Auscap Asset Management has pointed out that the big four ASX bank shares – which include Westpac, National Australia Bank Ltd (ASX: NAB) and ANZ Group Holdings Ltd (ASX: ANZ) – are trading on "the highest collective multiple the banks have traded on in at least the last few decades" and probably the highest ever.

In other words, CBA shares are the most expensive they have ever been in terms of the multiple of earnings they're trading at.

There have been plenty of expert opinions on Commonwealth Bank shares in the last few months. My colleague Zach recently reported on commentary from Jed Richards of Shaw and Partners, who said on The Bull:

Given high interest rates, increasing costs, a flat Australian economy and intensifying private debt competition, we believe the banking sector faces challenges in sustaining recent profits let alone generating growth.

The CBA's price/earnings ratio [P/E] is much higher than historical levels and is pricing in considerable growth. In our view, this is highly unusual and unlikely given the economic environment.

Let's keep in mind that AFIC sold only a relatively small percentage of its holding, and I don't think it's the type of fund to completely sell out of its position – the portfolio is likely to remain fairly similar to the ASX 200.

However, I think for smaller investors, it's worth noting what this long-term major investor decided to do.