The Commonwealth Bank has pulled in a record profit of $5.66 billion, a 20 per cent increase on last financial year.

The nation's biggest home lender recorded an even bigger cash profit, the banks' preferred measure, of $6.1 billion, which is 42 per cent higher than the previous year.

The bank's chief executive Ralph Norris says the result reflects the strength of the institution in difficult economic times.

"In a year when financial markets (particularly in the second half) were volatile and unpredictable we wrote over $90 billion in new loans and advances to retail and small business customers," he noted in the report.

"We also provided competitive interest rates and reduced, or eliminated, a range of fees. On the other hand, our good result and strong capital position enabled us to pay out $4.5 billion in interim and final dividends for the 2010 financial year to our shareholders with over 80 per cent ending up in the hands of Australian residents."

The dividend to shareholders came at the expense of people with home loans, as the bank increased net interest income by 11 per cent, although it says that was mainly through increased lending.

However, other banking income declined 3 per cent, largely reflecting the removal or lowering of many exception and penalty fees by the major banks.

Ralph Norris says that Australia's economy was in good shape, largely thanks to his institution and its peers.

"The relatively good performance of the Australian economy over the past two years can be attributed to the strength of our banking system," he told analysts.

But he says the domestic economy might still be vulnerable to any further severe international shocks.

"Recent uncertainty over the pace of recovery in the United States and Europe highlight the downside risks at play, and have not helped domestic consumer and business confidence," he said.

"As a result, it's appropriate to maintain a degree of caution about the short-term prospects and we have therefore retained our conservative capital and liquidity settings."

The bank says its tier one capital position remains strong at 9.15 per cent.

It will be paying a final dividend of $1.70 per share, taking the total dividend for the year to $2.90.

Investors seemed less than enthusiastic about the widely expected profit result, with Commonwealth Bank shares down even more than the general decrease in the Australian market, losing 2.2 per cent to $51.60 by 12:00pm (AEST).