National Australia Bank chief Cameron Clyne is increasingly confident the lender can deliver a long-awaited lift in performance over the coming year, amid signs its troubled British arm is finally on the mend.
The bank's profit jumped 9 per cent to a record $5.94 billion in the year to September, helped by a sharp fall in bad and doubtful debts.
After years of being dragged down by its British business, the bank said the UK economy was emerging from a funk and its portfolio of soured commercial property loans was improving as a result.
In Australia, where NAB has made an aggressive push to expand its share of the home loan market, its personal banking division also posted a 17 per cent surge in profits, to $1.2 billion.
Growth was slower in its flagship business banking arm, where earnings rose 3.3 per cent to $2.5 billion.
But echoing the views of ANZ Bank boss Mike Smith, Mr Clyne said he thought early signs of a lift in confidence would translate into more demand for credit, and higher profits, in 2014.
"If that confidence continues to strengthen, yes, I think we would say that we're reasonably optimistic about 2014 and credit growth."
NAB, the country's largest business lender, is likely to be a big winner from any bounce-back in corporate borrowing, which is expanding at the anaemic pace of just 1 per cent.
"If the economy grows, our business bank grows," Mr Clyne said.
The bank raised its final dividend by 7¢ to 97¢ a share, continuing the trend of strong growth in shareholder payouts.
The profit growth compares with last year, when NAB's earnings slumped 22 per cent due to troubles in its British arm.
This year that business was less of a drag on earnings.
The loss in its UK business that holds its book of soured commercial property loans narrowed by 40 per cent to £90 million in the second half, while earnings elsewhere in the country rose by a third to £55 million.
Although the 2013 performance was marred by a 4.4 per cent increase in costs, analysts said the result suggested the worst of the British troubles were over.
With bad and doubtful debts falling by a quarter to $1.9 billion, Bell Potter analyst T.S. Lim singled out improvements in credit quality as especially promising. NAB's British arm had probably put the worst behind it, he said.
"I think it will probably take a few more years, but at least I think they've hit the low point," Mr Lim said.
Return on equity rose 0.3 percentage points to 14.5 per cent, and if Britain is excluded, this figure rises to 17.5 per cent.
Despite the signs of improvement, analysts marked the bank down for the increase in costs, which were inflated by restructuring costs in its Australian business. Revenue growth was also fairly soft at 2 per cent.
NAB's shares fell 2.5 per cent to $35.31, as stocks in Westpac and Commonwealth Bank also fell amid reports the regulator will introduce tougher rules limiting dividend payouts.