Westpac's biggest division, Australian retail and business banking, had a poor year. The division contributed $1.7 billion of the bank's total cash earnings of $5.9 billion, but that was eight per cent down on its 2009 performance.Chief executive Gail Kelly said the disappointing result for the division was due to two things: higher funding costs and the impact of the bank's decision to reduce a range of retail and business banking fees.This is not a complete answer, however. Westpac made an aggressive play for growth in mortgage market share in the first half and accepted that it needed to pay a high price to fund its increased lending.Back at the start of the year it was Westpac that was making headlines, with a market-leading 12-month term deposit rate of eight per cent.In the year to March, the bank increased home loan market share from 25 to 27 per cent, taking advantage of what Kelly described as a once in a decade opportunity.Kelly's view was that it was worth paying a high price to acquire 355,000 home loan borrowers, including 60,000 first home buyers, with the prospect of cross-selling those new customers a whole lot more product in coming years.It is worth keeping in mind then that when the Westpac CEO talks about the high funding cost the bank is having to deal with it is a burden the bank imposed on itself in the hope of higher long-term returns. Things cooled off in the September half. Home lending grew 12 per cent over the year, about 1.2 times system growth, but slowed to four per cent in the second half, in line with system. Personal loan growth was one per cent over the full year, but fell two per cent in the second half.Kelly likes to say that the bank was "open for business" during the financial crisis and has remained so. Not if you are a business borrower. The five per cent contraction in Westpac's business lending was twice the system rate of decline.The division's cost to income ratio rose 220 basis points and its margin fell 19 points. Impairment charges in retail and business banking rose from $551 million to $589 million. The bank said this was due to the impact of higher interest rates.