Major banks lifted their profits over the last half, but their earnings constitute no record. Measured by return on equity, they are well short of their best.Cash earnings increased A$900 million, or seven per cent, to $13.4 billion.In six months, banks now make in profits the same amount of money it took them all year to earn in 2009. But they must do so on a greatly expanded capital base (the industry's principal response to the shocks generated by the GFC). The sector's capital has more than doubled since 2007.Return on equity over the March half increased to 16.1 per cent, compared with 15.5 percent in the second half of 2012. The average ROE during the last five years for major banks was approximately 15.7 per cent. "Record" industry profits would require returns in excess of 20 per cent of net assets, or more than $6 billion year in additional profit than the banks are making at the moment. Net interest margins fell by an average of six basis points, to 2.1 per cent, largely because of the continued deposit competition, re-pricing and lower credit demand Operating costs fell by an average of 1.8 per cent. Staff levels fell by around 1600, or one per cent, to 170,000.The cost-to-income ratio across the sector fell one hundred basis points, to 44.6 per cent from 45.6 per cent six months ago. Technology costs fell 5.4 per cent to $2.2 billion.Gross impaired assets fell from $20.3 billion to $17.8 billion.Bad debt expenses fell 17 per cent to $2.8 billionTotal provisions were $17.4 billion, down from $17.8 billion six months before.Banking Day acknowledges analysis of the major's banks profits by Ernst & Young, KPMG and PricewaterhouseCoopers - all sources for this article, along with the Australian Prudential Regulation Authority's quarterly banking statistics.