News: NAB UPDATE 1-National Australia Bank's annual cash profit rises on higher interest rates

(Adds details on results and background in paragraphs 2, 3 and 6)

Nov 9 (Reuters) - National Australia Bank (NAB) on Thursday posted an 8.8% rise in its annual cash profit as the country's second-largest lender benefited from elevated interest rates and an increase in lending and deposits.

The bank reported higher earnings on deposits and capital against the backdrop of a high interest rate environment, which has in recent times allowed Australian lenders to widen their margins and capitalise on higher borrowing costs.

Net interest margin, a closely watched measure that shows the amount banks take in interest payments minus operating costs, rose 9 basis points to 1.74% on an adjusted basis.

National Australia Bank's cash profit came in at A$7.73 billion ($4.95 billion) for the year ended Sept. 30, compared with A$7.10 billion a year earlier.

Analysts had expected a profit of A$7.80 billion, according to Visible Alpha estimates compiled by Citi.

The bank declared a final dividend of 84 Australian cents per share, up from 78 Australian cents apiece a year earlier.

($1 = 1.5620 Australian dollars)