Australia's four major banks earned a combined net profit of $20.7 billion over the last year - a pretty big number, and one with plenty of upside, if only banks could get their costs in order. The four banks earned a combined profit of $15 billion in 2009.Using their preferred cash-earnings measure, the return on assets for three banks - ANZ, Commonwealth and Westpac - ranged from 1.0 per cent to 1.1 per cent over 2010. This is close to the peak returns earned pre-crisis, when ROAs for major banks ranged from 1.1 per cent to 1.2 per cent, and which APRA records show were the standard for the sector in 2005, 2006 and 2007.The average ROE for the four major banks of 15.9 per cent this year is short of their best returns, which were in the high teens, and for some banks in excess of 20 per cent. This was achieved in the two years before the crisis of 2008.Impairment charges of $13 billion last year fell to $8.4 billion in 2010, and this reduction accounts for, essentially, the entire rise in profit for banks this year.This invites questions over the core business of the four major banks, since none of this year's large profit gain appears to have anything to do with their efforts to improve their businesses over the last year.Cost growth this year was surprising. It was up eight per cent over the year in Australia for National Australia Bank, for instance, though Westpac, which is putting the early stage of its St George integration behind it, reported a decline in costs.Some but not all the blame for a largely mundane year can be blamed on the overhang of the credit crisis. The credit cycle, if anything, continues to deteriorate, just more slowly and less noisily than in its early phases.A lower bad debt charge in profit and loss does not mean that the quality of bank loans is getting better, and, in fact, asset quality is getting worse.The ratio of impaired assets to total loans increased from 112 basis points in 2009 to 131 basis points in 2010.Commonwealth Bank and Westpac, with their weighting toward home loans and limited international operations, reported the lowest ratios, at 104 bps and 94 bps, respectively.ANZ's ratio was the worst of the four, at 171 bps, and for the first time includes the Royal Bank of Scotland assets in Asia acquired over the year.Most of this commentary draws on the analysis compiled by KPMG once again at the conclusion of the bank profit season.