The business bank at NAB has the best return on assets of all NAB's divisions, and the highest margin and the best cost-to-income ratio.NAB yesterday reported cash earnings of $1.2 billion for its business banking division in the six months to March - up 7.9 per cent on the previous corresponding period. The division contributed 44.3 per cent of total group cash earnings.Cash earnings on average assets were up five basis points on the previous corresponding period, to 1.25 per cent. The return on assets in the personal banking division was 0.7 per cent.The business banking net interest margin rose six basis points on the previous corresponding period, to 2.57 per cent. The net interest margin for personal banking fell 12 basis points, to 2.22 per cent; the New Zealand banking margin was 2.24 per cent and the UK banking margin 2.33 per cent.(Great Western Bank, NAB's flagship in the US, did have a better margin - 4.38 per cent - but its earnings contribution was US$47 million.)Business banking's cost-to-income ratio fell 40 basis points, to 29.9 per cent. Cost-to-income for personal banking was 53.4 per cent, for wholesale banking it was 45.7 per cent, for New Zealand it was 42.7 per cent and for the UK it was 59 per cent.The downside to a standalone business banking strategy tends to be low growth. Interest-earning assets in the division grew by 3.3 per cent over the previous corresponding period and 1.5 per cent over the September half.A highlight for the division was that, with all the other big banks chasing share in business lending, NAB increased its share from 20.8 per cent in the March half last year to 22.8 per cent in the September half, and 23.8 per cent in the latest half.The business bank continued to develop its successful relationship management strategy. It has added 384 relationship managers, product specialists and risk managers since 2009.Credit quality in the division improved, with the bad and doubtful debt charge as a percentage of credit-risk weighted assets falling from 0.56 per cent in March last year to 0.53 per cent in the latest half.The bad and doubtful debt charge fell 6.1 per cent to $385 million and the specific provision for doubtful debts fell 11 per cent.Joseph Healy, group executive for business banking, defended NAB's high concentration of loans in commercial property - equal to 13 per cent of assets.At the investor briefing he said: "I think the commercial real estate exposure in Australia needs to be understood in terms of its data.  "About half of the $42 billion is SME-based, where the average loan size is about $1.5 million. "It's a broadly diversified portfolio where we've got small businesses that have acquired the premises that they're working in, or it may be investment-related or vocation-related investments. But the average loan size of about half that book is in line with an average residential mortgage in some parts of the country. "It's not really commercial real estate as you traditionally think