News: UPDATE 1-National Australia Bank H1 cash profit rises as lending grows

• H1 cash earnings of A$3.29 billion
• Interim dividend steady at A$0.99 per share
• Economic outlook positive: CEO

(Recasts, adds details, CEO comment)

May 4 (Reuters) - National Australia Bank (NAB) reported a 2.3 percent rise in first-half cash profit on Thursday, bolstered by lending growth, although it warned of rising risks in the commercial property market.

Cash profit for the six months to end-March rose to A$3.29 billion ($2.44 billion) from A$3.22 billion a year ago, beating forecasts for A$3.24 billion, according to three analysts surveyed by Thomson Reuters I/B/E/S.

First-half net interest margin fell to 1.82 percent, from 1.93 percent a year ago due to higher funding costs, the country's fourth biggest lender said in a filing with the Australian Securities Exchange.

Chief Executive Andrew Thorburn said the operating environment for banks remained challenging but he was generally upbeat about the outlook.

"I think we should be taking a glass half full look at the Australian economy," Thorburn told reporters. "The economy continues to grow. People are heading for places like Sydney and Melbourne because of the job prospects."

NAB, however, increased its provisions by A$89 million relating to risks in the commercial property portfolio as housing price growth slows and there are fears of an oversupply in inner-city apartments.

"We want to be more prudent and more conservative," Thorburn said.

NAB reported two days after rival Australia and New Zealand Banking Group (ANZ), which is in a turnaround phase. ANZ's first-half cash profit rose by 23 percent to A$3.41 billion.

Australia's "Big Four" banks, in late March, jacked up mortgage rates for speculative buyers amid increasing worries over the red-hot housing market in Sydney and Melbourne.

In an effort to further contain the property market, the banking watchdog instructed banks to limit new interest-only loans to 30 percent of total new residential lending, from 40 percent previously, and hold more reserves as buffer against mortgages.

While mortgage rate hikes bode well for net interest margins, they could slow lending activity in the near-term.

NAB's housing loans rose 5.8 percent to A$320.79 billion from last year.

Its charge for bad debts rose 5.1 percent to A$394 million from last year.

The bank maintained its interim dividend at A$0.99 cents per share fully franked.

First-half cash return on equity fell to 14 percent from 14.3 percent a year ago, while Tier 1 capital stood at 10.1 percent at March 31. ($1 = 1.3473 Australian dollars)