Amid the 2018 Financial Services Royal Commission and the absolute beating that bank share prices took during the last 12 months, how did the Commonwealth Bank of Australia Ltd (ASX: CBA) share price still finish FY19 14% higher?
A share price rebound for the ages
Before news of the Royal Commission broke, CBA shares were trading as high as $87.40 before closing out calendar year 2018 at just $72.39 per share.
However, the CBA share price has still managed to climb 14% higher in the last 12 months despite the Royal Commission scrutiny to not only outperform its Big Four peers, but also the S&P/ASX200 Index (ASX: XJO).
Over the past 12 months, the S&P/ASX200 Index has climbed 7.14% higher after a shocking end to 2018 was offset by a near-record first six months of 2019.
And all the while, the CBA share price was quietly climbing higher – but why?
Royal Commission and interest rates boost CBA higher
Given some of the revelations that the public heard coming from Kenneth Hayne's Royal Commission, investors were understandably bearish on the banks (and broader Financials sector) during 2018.
However, Hayne's final report that was delivered in February this year lacked the bite that many expected, including his reluctance to recommend structural separation for the banking sector.
Structural separation (i.e. disallowing bank integration of certain services) could have potentially hampered the banks' growth prospects and forced a sell-off of divisions, which was ultimately built into the CBA valuation as it hit a 52-week low of just $65.23.
Given the lack of value-impact recommendations, lower funding costs from the cooling BBSW rate and the lowering of interest rates by the RBA, CBA shares are now trading at $82.78 and offering investors a healthy 5.5% dividend yield to boot.
What about the rest of the Big Four banks?
The news hasn't been quite as good for investors in CBA's competitors over the last 12 months.
The share prices of National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corporation Ltd (ASX: WBC) closed out the financial year 2.5% and 2.8% lower, respectively.
NAB's dividend cut earlier this year sent its share price tumbling lower while Westpac's half-year results failed to impress investors with a compressing net interest margin (NIM) muting the effect of the broader rebound in ASX Financials.
The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price has edged 1.4% higher over the last 12 months in better news for investors, but CBA remains the standout equity performer of the group.
While it's hard to call things from here in the short-term, I'll be watching the full-year reporting season in October/November to see who is likely to finish as king of the pack in FY20.
