National Australia Bank has lifted its quarterly cash profit nine per cent to $1.75 billion after a fall in bad debts offset the impact of tough competition among lenders in Australia.

The stronger June quarterly result takes NAB’s cash profit for the nine months to June to $5.07 billion.

Net profit for the June quarter was $1.85 billion, up from $1.7 billion a year ago.

NAB shares were down two cents to $32.80 as of 1010 AEST.

The bank also announced it would need to make additional provisions of up to STG500 million ($A1.05 billion) to its troubled Clydesdale business in the UK to cover the cost of possible future misconduct charges.

But the provisions will be covered by the STG1.7 billion NAB plans putting aside at the behest of UK regulators ahead of a planned spin-off of Clydesdale.

NAB’s quarterly result, which was up nine per cent compared to a year ago and six per cent compared to the March quarter, was driven by lower bad and doubtful debt charges in NAB’s Australian operations, as well as better earnings from its New Zealand and wealth management divisions.

Revenue and expenses both rose four per cent during the quarter, the bank said in its quarterly update.

But, the bank said, its net interest margin – the profit it makes on loans – fell during the quarter due to tough competition for business lending and weaker income from its markets and treasury business.

Chief executive Andrew Thorburn said the group was focusing on improving the performance of its Australian and New Zealand businesses, and exiting underperforming international operations.

“Over this period, we have maintained a clear focus on our core Australian and New Zealand business,” he said.

“We have continued to invest in a disciplined way in our priority customer segments of home lending, SME and Specialised Business, to deliver a better experience for customers and improve returns to shareholders.”

NAB has sold off its entire stake in its former US subsidiary Great Western Bancorp and plans to spin-off its troubled UK business, Clydesdale, by the end of the year.

The bank earlier in 2015 announced it would funnel STG1.7 billion ($A3.55 billion) into Clydesdale at the behest of UK regulators, to cover the potential future costs linked to misconduct by the business.

That move was part of a $5.5 billion capital raising that was also aimed at lifting NAB’s reserve levels ahead of moves by the banking regulator to force banks to hold more capital against their loans.

– AAP