National Australia Bank has lifted its annual profit by almost nine per cent, despite the challenges posed by rising interest rates and high inflation.

Australia’s largest business bank reported cash earnings of $7.7 billion for the 2023 fiscal year, up 8.8 per cent from the year before.

Its statutory net profit rose 7.6 per cent to $7.4b.

NAB chief executive Ross McEwan said the operating environment was more challenging in the second half of the year and was likely to remain so in the near term.

“We saw the impact of higher interest rates in our first half performance,” he said in a statement on Thursday.

“However, our results softened in the second six months amid intense competition as customers seek the best deal.

“This is all leading to some of the thinnest mortgage margins I’ve seen in my time in Australian banking.”

NAB on Wednesday passed on this week’s interest rate increase by the central bank to variable rate borrowers.

Rates have been rising since May last year, when the Reserve Bank of Australia began hiking the cash interest rate in a bid to head off inflationary pressures in the economy.

“Some customers are feeling it more than others and the RBA’s decision to again increase the official cash rate this week because of persistent inflation will increase the pressure on households,” Mr McEwan said.

NAB’s full-year results again reflect the profitability of its key business and private banking arm, which delivered a 10 per cent rise in earnings to $3.3b.

NAB shareholders will be paid a final dividend of 84 cents per share, taking the total for the year to $1.67.

– AAP