The money laundering scandal and costs associated with the bank Royal Commission have scythed $575 million off Commonwealth Bank's first-half profit.

Key points: CBA profit cut by $575 million to allow for expected money laundering penalties and royal commission costs

CBA profit cut by $575 million to allow for expected money laundering penalties and royal commission costs Underlying cash profit down 1.9pc to $4.7b, well below market expectations

Underlying cash profit down 1.9pc to $4.7b, well below market expectations Shares rebound, but not as strongly as other banks

The bank reported a first-half profit of $4.9 billion, an increase of 1.2 per cent on the previous corresponding period.

Its cash profit — the measure preferred by the banks and studied by the market — came in at $4.73 billion.

That was down almost 2 per cent on last year and well short of expectations of a record result in excess of $5 billion.

The result was dragged down by a charge of $375 million the bank said it had set aside for an expected penalty relating to alleged contraventions of Anti-Money Laundering and Counter Terrorism laws and $200 million set aside for costs to be incurred in the Royal Commission.

'Reliable estimate' of legal costs

CBA chief executive Ian Narev offered a degree of contrition in announcing the results.

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"During this period [the six months to December 31], we have focused a great deal of effort on fixing our mistakes, and becoming a better bank," Mr Narev said.

"We have taken a significant provision for regulatory and compliance costs, consistent with accounting standards.

"We have also taken a $375 million expense provision which we believe to be a reliable estimate of the civil penalty a court may impose in the AUSTRAC proceedings.

"We recognise, and regret, that these costs arise from our failure to meet some standards that we should have," Mr Narev told investors in what will be his last results presentation.

Underlying business solid

The overall result indicated the basic mechanics of the bank were ticking over.

Total revenue was up 5.5 per cent and the bank managed to expand its margins, helped by raising the price of investment mortgages.

Costs — excluding the provisions set aside to deal with legal and regulatory problems — were flat.

Home loans grew at 5.2 per cent, which was below the big bank average of 6.2 per cent growth and way behind the re-energised non-bank lending sector which is growing at double-digit pace.

The bank confirmed it was cutting its exposure to loans for apartment developments, with lending for the half down around 20 per cent from a year ago to $4.1 billion.

Provisions for bad debts edged up marginally, mainly driven by an exposure to the collapsed UK building and maintenance business Carillion, but remain low and contained, while non-performing loans were steady.

The bank's tier one capital buffer strengthened in line with APRA's demands for an unquestionably strong balance sheet, although it flagged new accounting practices will see that reduced again in July.

Investors were rewarded for sticking by the bank with an extra cent in their full year dividend which now stands at $2 a share.

Wary of economic risks

Mr Narev said while overall global economic trends were positive, the bank remained wary about risks.

"Market volatility remains a risk given ongoing global uncertainty as to the pace and extent of rate rises," he noted, pointing to the mass capitulation on global equity markets in recent days.

On the local front, Mr Narev said low wage growth was eroding confidence.

"Despite the positive trends in job creation, trends in wage growth and underemployment may cause households to remain cautious, which in turn weighs on consumption and business investment."

UBS analyst Jonathan Mott said the result, despite the headline miss, was broadly in line with expectations, albeit being propped up by some of the bank's more volatile revenue streams.

Mr Mott argued cost management was probably the highlight for CBA investors, but questioned lending by the institutional arm of the bank.

"Higher credit losses in institutional banking are inevitable given the very low base, but once again brings into question why CBA has been lending internationally," Mr Mott said.

Investors were not impressed, with CBA's share price down 0.2 per cent to $77.22 at midday, lagging the gains made by the other banks in the session's rebound.