From BBY on the CBA earnings update:
NPAT of $2.1bn implies higher rate of profitability than BBY FY14 forecast of $8.1bn. Expected rate of increase in BDD charges not coming through – $228m for 1Q was flat on good 2H FY13 performance. BDD charge is tracking at $900m vs BBY FY14 estimate of $1.2bn – room for upgrade here. Income growth is on track for 4% pa (consistent with BBY forecast) while expense growth is slightly lower (again in line with BBY expectations). NIM was down slightly from a good 2H FY13 with trading income remaining at relatively strong levels (contrast to WBC and NAB). Mortgage market share growth was slightly above market suggesting CBA is giving up a little on price to secure better share. CBA saw a decline in impaired assets in the period to $4.28bn, strong provisioning levels and coverage ratios have been maintained. In short stronger profit momentum seen in 4Q FY13 maintained in 1Q FY14 (3Q FY13 $1.9bn, 4Q FY13 $2.1bn, 1Q FY14 $2.1bn).
Summary: maintain BUY. Earnings upgrade of approx. 4% primarily due to lower bad debts