Operating income and customer deposits were up and loan impairment expenses down at CBA, but penalties cut deep into the bank's operating expenses. Operating income:   A$25.9 billion, up 2.6 points. In the second half of 2018, NIM reduced to 2.14 per cent due to home loan switching and discounting, higher wholesale funding costs basis risk offset by run-off of low margin institutional lending, higher New Zealand NIM and deposit pricing.Expenses and cost-to-income: Operating expenses reached $11.6 billion, up 9.2 per cent, largely due to the Austrac civil penalty of $700 million. Cost-to-income: The cost-to-income ratio rose 270 basis points to 45.4 per cent.Loan impairment expense of $1.079 million was down 1.5 per cent, equivalent to 15 basis points of gross loans and acceptances.Other banking income: Subdued activity, as a consequence of lower trading revenue, reduced interchange and removal of ATM fees, yielded $4.95 billion, down from $5.14 billion in FY17.Funding: In what was a rare high point for CBA, customer deposits increased to 68 per cent of CBA's funding requirements over the year to June, boosting the proportion of funding sourced from these deposits from 66 per cent to 67 per cent. The Net Stable Funding Ratio was 107 per cent. The average term of the wholesale funding portfolio was 4.1 years and the average tenor of new issuance was 5.1 years.Lending volumes: Volumes were two per cent higher than last year, also supported by a favourable change in funding mix from strong growth in transaction deposits. The gains were partly offset by higher funding costs due to the impact of the major bank levy and higher wholesale funding costs. In the second half of 2018, NIM reduced to 2.14 per cent due to home loan switching and discounting.Net interest margin: increased five basis points on the prior year to 2.15, largely due to the repricing of interest-only and investor loans undertaken in order to manage regulatory requirements.