National Australia Bank shareholders are rubbing their hands together with glee after the bank reported a massive profit and promised the riches would flow through to its owners.

Following bumper results from Westpac and ANZ, NAB saw profits jump by 8.5 per cent – a gain of $247 million on a year ago.

But shareholders were the big winners. When the dividend cheques arrive, they will pocket 99 cents a share, up six cents.

But investors were less than impressed with Australia’s fourth largest bank, with NAB shares falling when trade opened this morning – it was five cents lower at $33.79 at 10.45 AEST.

Outgoing chief executive Cameron Clyne said the UK business was benefiting from improvements in the economy.

“The economic environment continued to improve during the period. This is evident in the UK where confidence and economic growth have risen again and become more broad based,” he said.

Mr Clyne was also optimistic about the outlook for business lending in Australia.

“In Australia, the housing sector has strengthened further, and improved business confidence, along with corporate gearing at near 20 year lows, makes us optimistic about the business sector and potential for a recovery in business credit growth.”

Net profit was $2.856 billion, up nearly 16 per cent compared to the $2.466 billion recorded previously.

The bank attributed the improved result to a 52 per cent reduction in bad debt charges from its Australian and UK operations.

NAB’s revenue rose 2.6 per cent during the half, thanks to a lower Australian dollar, while the bank’s group net interest margin fell nine basis points to 1.94 per cent.

Cash earnings from NAB’s Australian banking operations lifted one per cent to $2.474 billion after growth in mortgage lending offset weaker margins.

Earnings from the UK banking operations more than doubled to STG73 million pounds ($A133.25 million), thanks to the reduction in bad debt charges.

NAB’s UK commercial real estate division recorded a seven million pound loss, which is a substantial improvement on the 149 million pound loss it suffered a year ago.

Meanwhile, earnings from the NAB Wealth division were flat at $174 million while New Zealand Banking earnings rose three per cent to $NZ400 million ($A372.39 million).