Retail banking franchise buoyed Commonwealth Bank's FY14 results

It delivered well, to say the least.

Following its solid performance in 1H14 the market had high expectations for Australia-based Commonwealth Bank's (CBA) FY14 result.

According to a research note from Nomura, against this backdrop, 2H14’s underlying performance was marginally below estimates (lower quality items lifted earnings to be in line with consensus expectations).

Across the business units this result was again a reminder of the haves and the have-nots of the current Australian banking environment.

The report noted that CBA's retail bank continued to perform strongly both in an absolute and relative sense while business and institutional banking had a challenging six months.

The retail bank delivered solid balance sheet trends, good margin performance and cost control.

Here's more from Nomura:

Although we believe these trends are not going to last indefinitely, and we expect the performance of business-leveraged divisions to improve, in the short term it appears that retail banking is still the place to be.

This result again highlighted the strength of CBA’s core retail banking franchise, which is the largest division within the group.

Retail Banking was the strongest performing division in 2H14, delivering ~6% pre-provision profit growth h-h.

This was underpinned by solid volume growth (~3% h-h), margin expansion (NIM up by ~7bps h-h), and good cost control.

On the other hand, both Business & Private Banking, and Institutional Banking & Markets continued to operate in more challenging environments.

Low interest rates impacted their margins while demand for business credit remains subdued.

This led to both business units delivering negative growth in the half.

Elsewhere, NZ reported a solid set of results while Bankwest was impacted by a continuing runoff in its business book.