Australian and New Zealand Banking Group, Australia's third-biggest lender, missed forecasts with a 7 percent rise in its second-half profit, as provisions for bad loans increased.
ANZ said conditions in all its key markets were supportive for growth, but unlike last year it did not give any revenue or cost growth estimates as new Chief Executive Officer Michael Smith said he did not believe in giving targets.
"What I am saying is that income growth will outstretch cost growth. Whilst we have a cost-to-income ratio which I think has room to come down, I would like to see that continue," Smith told reporters.
Melbourne-based ANZ, which is fast expanding into Asia, said on Thursday its second-half cash net profit climbed to A$1.988 billion (US$1.79 billion) in six-months ended Sept. 30 from A$1.856 billion a year ago.
Six analysts on average had projected ANZ's profit to be A$2.008 billion.
Cash earnings -- effectively core profit excluding one-off items and non-cash accounting items -- forms the basis for dividends payable to shareholders. Full-year cash profit rose 9 percent to A$3.924 billion, with the personal division delivering a 16 percent profit rise.
"Personal should continue to do well although opportunities to sustain the unusually high levels of growth experienced in recent years are becoming more limited," ANZ said in a statement.
Australian banks have benefited from 16 straight years of economic growth while unemployment at a three-decade low has kept bad debts under check.
Smith who took charge earlier this month said there was scope to grow within Australia, although the market expects him to accelerate ANZ's growth in Asia. "We can get far more out of this business domestically and also I want to expand within this region, because my belief is that the regional model makes more sense now," he added.
But turmoil in global credit markets has pushed up banks' funding costs, raising concerns about loan growth.
Several Australian banks have been forced to shift billions of dollars of loans from separate investment vehicles back onto their balance sheets as the credit squeeze crimped supply of once-abundant funding.
"The increase of funding costs is obviously going to have an impact. But on the other side of that story you are having a repricing of risk in the corporate sector as well. So there will be at some stage an increase in income on that side," Smith said.
ANZ's latest market update confirmed it was on track to meet its revenue and cost growth target but the bank also flagged a significant rise in provisions.
ANZ shares have risen 10.3 percent so far this year, slightly less than a 11.7 percent rise in the eight-stock bank sub-index. ANZ shares last traded at A$31.11.
Earlier this month regional lender Bank of Queensland reported a 22 percent rise in annual profit. Other big banks, including top lender National Australia Bank, are due to release full-year earnings over the next two weeks.