An important difference between the big banks and their smaller rivals was made clear yesterday when Westpac chief executive Gail Kelly told analysts at a December 2008 quarter update that the bank's margin had improved over the quarter.On Monday Bendigo and Adelaide Bank reported that its net interest margin had fallen 16 basis points in the December half.Bendigo and Adelaide offered very high term deposit rates last year as it shifted the weight of its funding to retail deposits. Some of those deposits are still to mature.And with a loan book that is dominated by home loans, Bendigo and Adelaide had limited scope to re-price.Westpac, on the other hand, has been able to improve its margin by re-pricing its commercial lending book. Commercial borrowers have come off second best when it comes to interest rate setting over the past six months.Kelly said margins also improved as a result of higher Treasury income. In the December quarter Westpac produced cash earnings of around $1.2 billion, two per cent down on the previous corresponding period.Lending was up 2.4 per cent and deposits increased 9.6 per cent.The dip in earnings was due to higher impairment charges (of which more below). The charge for the December quarter was $800 million, compared to $144 million for the December quarter 2007.Kelly said it was not the bank's usual practice to provide a quarterly update, but given how volatile things were it seemed appropriate.Banks should continue the practice, given that their Pillar 3 reporting will be done on a quarterly basis.