Commonwealth Bank says its home loan rates could be cut independently of cash rate movements, as improving economic conditions helped it post another record profit.

Australia's largest home lender made a net profit of $3.66 billion in the six months to December 31, up one per cent on the same period in the previous year.

Its cash profit, a measure preferred by banks as it illustrates underlying performance, was up six per cent on the previous corresponding period to a record $3.78 billion.

The better-than expected profits pushed CBA shares to a record high, and put the bank on track for another record full year profit near $7.6 billion.

CBA's retail bank was a standout performer in the six months to December, in part due to higher margins as interest rates fell by less than the cash rate.

The Reserve Bank of Australia cut the cash rate by 125 basis points to three per cent in calendar 2012, while CBA's standard variable mortgage rate was cut by just 90 basis points to 6.4 per cent.

With the cost of wholesale funds easing, analysts have raised the prospect of major banks lowering interest rates outside of any further moves by the RBA.

CBA chief executive Ian Narev on Wednesday confirmed that could happen.

"I'm not allowed to say anything on future prospects for pricing," he told reporters.

"What I could say is that it is a competitive market, and if we reached a different environment in terms of both the volatility and the cost of funding, that is conceivable, yes."

But he said the cost of attracting deposits from consumers still focussed on saving rather the spending continued to negatively impact profits being made from deposit accounts.

Nonetheless, Mr Narev issued a promising outlook for the Australian economy, another factor behind the bank's strong share price rise.

Improvements in Europe and the United States had reduced the level of global economic volatility in recent months, he said.

"That volatility will remain lower, and as it keeps remaining lower month on month, we will see a slow and steady rebuilding of confidence in the Australian economy from both consumers and businesses," Mr Narev said.

The bank also increased its interim dividend to shareholders by 20 per cent from a year ago to $1.64.

Morningstar analyst David Ellis described CBA's result as "a cracker", well ahead of expectations of a cash profit of $3.7 billion.

"Australia's largest bank continues to prosper due to better margins, higher trading income, a recovery in wealth management and productivity improvements," he said.

The company's shares gained $1.59, or 2.43 per cent, to $67.11, after hitting a record high of $67.38 during the day.


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