News: NAB UPDATE 1-Australia's Westpac FY profit flat as legal costs, refunds mount

(Adds other performance metrics, background on financial sector inquiry)

Nov 5 (Reuters) - Westpac Banking Corp (WBC) reported flat cash earnings growth on Monday, missing expectations, as customer refunds and legal costs soared in the wake of damaging revelations of wrongdoing at a public inquiry.

Australia's No. 2 lender said cash earnings for the year ended Sept. 30 came in at A$8.07 billion ($5.80 billion), compared with A$8.06 billion a year ago.

That was lower than an average estimate of A$8.18 billion from six analysts polled by Reuters.

Cash profit, a measure that excludes one-offs and non-cash accounting items, is closely watched by investors.

In September, the lender had flagged that its annual cash earnings would be reduced by about A$235 million because of provisions for customer refunds and litigation.

Earlier that month, Westpac also agreed to pay a A$35 million fine for wrongly approving thousands of mortgages.

“While the economic environment remains supportive, this result reflects the tough operating conditions for banks, with higher regulatory, compliance, and funding costs, and increased competitive pressure, particularly in the second half," said Chief Executive Brian Hartzer in a statement.

Australia's biggest banks have been hit by a barrage of damaging allegations since February, when a powerful public inquiry in financial-sector wrongdoing began exposing their abuse of power and contempt of customers.

That has shredded the reputations of Australia's biggest money managers, leading to higher costs for litigation, compensation and compliance and undercutting earnings.

Australia and New Zealand Banking Group (ANZ) and National Australia Bank (NAB) reported lower full-year profit last week. Commonwealth Bank (CBA) , the biggest of the four, reports its first-quarter results on Wednesday.

Westpac's net interest income rose 4 percent to A$16.34 billion, while net interest margin - a barometer of profitability - was up 2 basis points to 2.11 percent.

It declared a final dividend of A$0.94 per share, the same as last year. ($1 = 1.3918 Australian dollars)