National Australia Bank Ltd (ASX:NAB) has beat market expectations to reveal an 18 per cent lift in first-quarter cash profit thanks to lower provisions for bad debts and increased banking revenue.

In the three months to 31 December 2010, NAB made $1.3 billion, up from $1.1b at the same time a year earlier, putting it on course for a record first-half profit.

Chief executive Cameron Clyne said business banking and personal banking were key drivers of group revenue during the first quarter.

“Business banking continues to gain market share and extend its leadership position in SME banking in what remains a subdued business credit environment,” he said.

Lending volumes were up despite continued negative business system credit growth. Margins improved, reflecting repricing for current market conditions. Bad and doubtful debt charges were slightly lower.

“Personal Banking continues to experience strong momentum in mortgages and transaction accounts, and improved its product and service capabilities,” said Mr Clyne.

Group housing lending market share was up 31 bps to 13.61 per cent, continuing the momentum of the 2010 financial year. Customer acquisition remained a feature with robust transaction account growth and increased credit card applications.