H1 cash profit at A$3.9 bln vs A$4.07 bln estimate H1 loan loss...

• H1 cash profit at A$3.9 bln vs A$4.07 bln estimate
• H1 loan loss provisions A$667 mln vs A$341 mln year ago
• NIM at 2.14 pct vs 2.11 pct in September
• Westpac shares hit nearly 3-week lows on Monday

(Adds analyst comment, shares, recasts lead)

Australia's No.3 lender Westpac Banking Corp (WBC) missed forecasts with a 3 percent rise in first-half cash profit as bad debt charges soared to a six-year high while stricter capital rules pinched shareholder returns, sending its shares skidding.

Charges for soured loans nearly doubled to A$667 million during the six months-ended March 31 as a commodities price bust led to higher corporate as well as consumer defaults.

Dark clouds are gathering over Australia's financial sector, which sailed through the global crisis but now faces slowing profit growth, tougher capital rules, rising defaults and questions over corporate responsibility in an election year when bank misconduct is shaping as a hot issue.

A cooling housing market is another headache. Westpac CEO Brian Hartzer said he expects a "slight moderation" in credit and deposit growth as housing investment eases, as well as some increase in consumer deliquencies led by the mining downturn.

"It's fairly obvious that we are through the best part of the impairment cycle," Hartzer said on a post-earnings call. "Having said that ... stressed levels are fairly stable and we don't see a broad-based deterioration in asset quality."

Investors sold down the sector, with the major banks including Westpac among the top losers on the index on Monday. At 0042 GMT, Westpac shares dropped 5 percent to a near 3-week low while the benchmark index (xjo) slipped 1.2 percent.

The nation's oldest bank declared an interim dividend of 94 cents a share, unchanged from the final dividend of 2015. Westpac has grown dividends consistently since September 2009.

"This is prudent given the requirements for higher levels of capital but at the same time is a negative given the previous trajectory of increasing dividends," said Omkar Joshi, investment analyst who helps oversee about A$1 billion at Watermark Funds Management Pty.

Australia's major banks raised a record A$20 billion 2015 to meet new reserve capital rules.

Return on equity of 14.2 percent came in below Westpac's target of 15 percent.

Cash earnings for the six months ended March 31 rose to a record A$3.9 billion ($2.96 billion) compared with A$3.78 billion a year ago and a A$4.07 billion estimate of six analysts, led by growth in mortgages and corporate loans.

Net interest income, the difference of interest earned and paid out, rose 10 percent with net interest margins, a key gauge of profitability, increased to 2.14 percent. ($1 = 1.3161 Australian dollars)