Commonwealth Bank yesterday reported a net profit of A$3.05 billion for the six months to December. Profit was up 10.9 per cent on the previous half and 4.7 per cent on the previous corresponding period.On a cash basis, earnings of $3.3 billion were 5.6 per cent higher than the previous half and 13 per cent higher than the previous corresponding period.The improvement in earnings was largely due to a reduction in bad debt charges and tight cost control.Income growth was weak. Net interest income rose two per cent, to A$6.2 billion, reflecting five per cent growth in interest earning assets, partly offset by a fall in the net interest margin.Other banking income fell one per cent to $2.06 billion. The bank cut retail banking fees last year and this had an impact during the half. CommSec's income was down because of weaker overall equity market volumes.Loan impairment expense was $722 million - up from $692 million reported in the previous half but well down on the $1.4 billion of bad debt charges reported in the previous corresponding period.The bank's heavy weighting towards home lending in its asset mix helped produce a return on equity of 19.2 per cent (less capital needs to be put aside to support a home loan). The return on assets was just one per cent, and the bank took the trouble to stress that on the core banking business the ROA was 0.9 per cent, a point no doubt made for the benefit of the political class.Asset quality improved, though not by much.Impaired assets fell one per cent, to $5.18 billion, over the last six months. Loans 90 day or more past due fell four per cent, to $3.2 billion.Transport and storage was the industry sector to show the greatest drift in asset quality over the half year, with impaired assets in this industry sector rising four-fold, to $217 million.Impairments fell in Australia over the last six months but increased slightly at ASB in New Zealand and increased by 50 per cent in other offshore markets, including Indonesia.The bank pared back the surge in losses on credit cards reported six months ago, but at $145 million they remain higher than a year ago.