Westpac Banking, Australia's fourth-biggest lender, met analysts' forecasts with a 10 percent rise in first-half core profit, driven by growth in business and consumer lending.
In its first results under new Chief Executive Gail Kelly, Westpac said on Thursday it expected banks to face slower loan growth, higher charges for bad loans to consumers and businesses, and saw higher funding costs continuing as Australian economic growth slowed.
"While we remain cautious about the current environment, I am confident that our business is in good shape for the longer term," Kelly said in a statement.
A fund manager said there were no shocks in the result. "They had solid revenue and contained expense growth. It's very good, so far, on my readings," said Peter Vann, head of investment research at Constellation Capital Management.
Westpac reported cash profit of A$1.839 billion (US$1.73 billion) for the six months to March, up from A$1.678 billion a year earlier, in line with analysts' forecasts around A$1.844 billion.
Cash profit, which strips out one-offs and non-cash accounting items, forms the basis for dividends.
Gains from the initial public offerings of its BT Investment Management arm in Australia and Visa in the United States helped boost net profit by 34 percent to A$2.2 billion.
Australian banks have largely avoided the subprime crisis roiling global banks, but have not dodged higher funding costs. And with Australia's economic growth slowing and inflation rising, more loans are starting to sour.
Westpac is the second major bank to report results this season, following Australia and New Zealand Banking Group, which posted a 14 percent fall in core profit and quadrupled its bad debt charges to A$980 million.
The more conservative Westpac booked charges of A$433 million to offset problem loans, up 87 percent on a year ago, but Kelly said the group's credit quality was sound.
An increase had been expected, but some analysts had warned that the new chief executive might be more aggressive.
"Whilst Westpac has probably the cleanest loan book of the major four banks, I thought she might have taken the opportunity to take a bit more if possible," said Vann.
Westpac's non-interest income rose 28 percent to A$2.3 billion, while its net interest income rose 12 percent to A$3.5 billion.
Its shares have fallen 12 percent so far this year, outperforming a 20 percent fall in the financials index.