National Australia Bank has bumped up annual earnings to more than $7 billion following a “pleasing” year during which it reaped the rewards of rising interest rates.

Australia’s largest business-focused bank reported cash earnings of $7.1 billion for fiscal 2022, up 8.3 per cent from the previous year.

Cash earnings are the banking industry’s preferred measure of operational strength because it strips out volatile and one-off items.

NAB’s bottom line net profit also rose 8.3 per cent, to $6.9 billion, in the year ending September 30.

“Our FY22 results are pleasing,” CEO Ross McEwan said on Wednesday.

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The result was attributed to volume growth and cost management, and interest rates.

“After 11 years of interest rate reductions, earnings have also benefited in FY22 from the rising interest rate environment,” Mr McEwan said.

Borrowing rates have been rising steadily since May when the central bank first began hiking the cash interest rate from a historical low of 0.1 per cent.

Mr McEwan pointed to the current economic uncertainty, noting households are likely to be challenged by further rate rises and soaring inflation.

“However, strong employment conditions along with substantial household and business savings give us confidence in the resilience of our customers and the broader economy,” he said.

NAB has forecast Australia’s economic growth to slow to about 1 per cent over each of the next two years from about 2.8 per cent in 2022.

It also predicts the central bank’s cash interest rate peaking at 3.6 per cent in March year, from 2.85 per cent now.

But much depends on how the rate of inflation – currently at a very high 7.3 per cent – tracks over the short term. If it blows out, rates could rise even more.

NAB’s net interest margin – which measures the money it generates from credit products – rose six basis points in fiscal 2022 to 1.65 per cent.

“This primarily reflects higher earnings on deposits and capital as a result of the rising interest rate environment, mostly offset by home lending competition,” NAB said.

Net interest income – the difference between interest-bearing assets (like loans) and liabilities (like customer deposits) – was $14.9 billion, up 7.6 per cent.

But the bank also booked a credit impairment charge of $126 million for the year.

Still, loan “delinquencies” have improved across the bank’s Australian home lending portfolio.

NAB will pay a final dividend of 78 cents, taking the payout for the year to $1.51 a share.