The Commonwealth Bank's first-half profit has surged 16 per cent to $4.2 billion, helped by cost cutting.

CBA's preferred measure of cash profit for the six months to December 31 rose 14 per cent to $4.27 billion.

CBA says its revenue was up 8 per cent, despite subdued market conditions, but it also got a significant profit boost from a 90 basis point reduction in its cost to income ratio, on the back of productivity improvements.

The bank's chief executive Ian Narev says the result shows CBA's business strategy is working.

"This result again demonstrates the benefits of our long term strategic priorities – people, technology, strength and productivity," he noted in the profit report.

"Our on-going productivity initiatives have helped us maintain our expense discipline and, at the same time, deliver revenue growth. So, we have again been able to invest for the long term benefit of the business, with nearly $600m of investment in this half."

CBA says its overall net interest margin - the gap between the rate it borrows at and lends at - eased 3 basis points to 2.14 per cent compared to the prior half-year on funding and liquidity pressure.

It says customer deposits were up $40 billion to $426 billion, and make up 63 per cent of its funding.

However, CBA says competition for those deposits is one of the main sources of pressure on its net interest margins, and presumably a key reason it has not passed through more interest rate cuts to those with mortgages despite improving conditions in international funding markets that have allowed it to raise $17 billion of long-term debt at lower costs.

Mr Narev says the bank is remaining cautious in its outlook for the Australian economy this year, with global volatility continuing and few signs of domestic improvement beyond the housing market.

"However, growth forecasts for developed economies have improved, consumer spending over the holiday season was generally higher than last year, corporate balance sheets remain strong, there is positive activity in the housing sector, and the Australian dollar has become more competitive," he said.

"So, all in all, we continue to assume that any improvements in economic activity in the next year will be gradual rather than dramatic. We will stick to our proven strategy, and maintain business settings that reflect both the risks and the opportunities of this economic environment."

The bank is issuing an interim dividend of $1.83 per share, fully-franked, up 12 per cent on the same period last year.

The dividend will be paid on April 3, while shareholders who buy on or after February 17 will not be eligible for the latest payment.