Bank of Queensland's net profit for the six months to February slumped 45 per cent on the back of a steep increase in bad debt charges.The bank reported a net profit of A$50.4 million for the half yesterday - down from $88.7 million in the previous half, and $90.9 million in the previous corresponding period.Earnings per share fell 43 per cent and the return on equity was 4.1 per cent. The net interest margin recovered from its dip in the second half of 2010 to reach 1.65 per cent. While earning a normalised EPS of 23.8 cents per share in the half, the bank will nevertheless pay a dividend of 26 cents a share, a decision justified by BOQ's chief executive, David Liddy.Almost half of the interim profit may arise from the upstreaming of dividends from St Andrews Insurance, which BOQ acquired in July 2010. In at media release summarising the profit, the bank said almost half the $49.8 million acquisition cost of St Andrews "has already been repaid via dividend payments".The bad debt charge increased from $51.4 million in the February half last year to $134.4 million in the latest half.Of the $134.4 million, $45 million was classified as weather events, $35 million as large exposures and $54 million was largely accounted for by commercial loans.Sixty-seven per cent of the bank's bad debts were business loans and 17 per cent were leases.BOQ's chief executive, David Liddy, said there were four large exposures in the $35 million charge.BOQ has 22 exposures worth more than $20 million each, with a total commitment of $730 million. Seventy-two per cent of these exposures are in the property and construction sectors (the bank has no Gold Coast high-rise residential exposure, however).In December, the bank issued a trading update in which it cited "a forensic review of our top 250 commercial exposures."The bulk of the increase in the bad debt charge came out of that review. The bank has opted to treat that increase as a one-off and argued yesterday that the market should focus on its underlying earnings, of $215 million - up 14 per cent on the previous corresponding period.But it was clear from analysts' questions at a briefing yesterday that investors are sceptical about this treatment. There were concerns about whether the commercial property market situation might continue to deteriorate and that the economic effects of the Queensland floods and cyclone might be prolonged rather than short-term.One analyst said: "You're assuming that the asset quality issues were one-offs, but if you look at a lot of the other banks which have had significant impairment charges, they tend to be elevated for a while. They don't just bounce straight back. So, the question is: what gives you such confidence that this is going to happen?"Liddy replied: "From our knowledge - and we're across all our portfolios - we think that our bad debts will normalise to perhaps where they were about 18 months ago.  We've done a complete review of the portfolio and