National Australia Bank has made a record profit of almost $6 billion and hopes an improvement in business confidence will boost its bottom line next year.
NAB's cash profit, a measure used to reflect underlying performance, was $5.94 billion in the 12 months to September 30, up more than nine per cent on the previous year.
The bank's net profit, which includes one-off financial items, was $5.45 billion, up 34 per cent from $4.08 billion the year before.
Rising business confidence should boost trading conditions for the bank, Australia's biggest business lender, in 2014, chief executive Cameron Clyne said.
"If that confidence continues to strengthen I'd have to say we're reasonably optimistic about 2014 and the credit growth that will flow from it," he said.
The bank lifted its performance in 2012/13 after being weighed down for several years by poor business sentiment and bad debts in its UK business.
"I think you've got to separate what are effectively some legacy issues from the core franchise - the core franchise is performing very strongly," Mr Clyne said.
"Obviously the UK is a difficult environment, it's a business this management team inherited and we are working our way through it."
The record profit result failed to impress investors, who sold NAB shares, sending them down by as much as 3.5 per cent in early trade.
The shares closed at $35.31, down 92 cents, or 2.5 per cent.
NAB's profit was in line with expectations, but the details of the result were less impressive, Morningstar analyst David Ellis said.
Profit rose mostly due to a fall in bad debts, and earnings growth hadn't been as strong as expected.
"Earnings quality was not as good as expected with cash earnings for the wide moat major bank boosted by a sharp fall in bad debts," Mr Ellis said.
The bank's net interest margin, a measure of the profit it makes on loans, fell nine basis points to 2.02 per cent during the year.
NAB has offered the lowest standard variable interest rate on mortgages among the big four banks for more than four years.
Meanwhile, its charge for bad and doubtful debts was $1.93 billion, down $681 million from the previous year thanks to improved asset quality trends, particularly in NAB's UK business and its business banking division.
NAB will pay a fully franked final dividend of 97 cents, up seven cents from a year ago, taking full year dividends to $1.90, up from $1.80 last year.
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