* Q3 profit of A$1.75 bln, revenue up 4 pct
* Bad debt charges down 15 pct to A$193 mln
* Tier-I ratio stands at 9.94 pct at June-end
* Result contrasts with downbeat show from ANZ last week (Adds analyst comment, shares)
By Swati Pandey
SYDNEY, Aug 10 (Reuters) - National Australia Bank NAB.AX on Monday said third-quarter unaudited cash profit rose 9 percent while bad debts dropped, outperforming its peers which are struggling with higher defaults and slowing earnings growth.
Australia's biggest lender by assets has long trailed its three main rivals on earnings growth and shareholder returns, but under new CEO Andrew Thorburn it has a clear plan to exit its troubled UK businesses and focus on its more profitable home market.
NAB said growth in mortgages and business lending in Australia and New Zealand helped boost revenue by 4 percent for the quarter-ended June 30, while charges for bad and doubtful debts fell 15 percent.
"They are definitely coming from the back of the pack," Morningstar analyst David Ellis said.
NAB reported unaudited cash earnings of A$1.75 billion ($1.3 billion) for the quarter. It did not give a year-ago comparison in its trading update. Net interest margins fell due to stiff lending competition and weaker treasury income.
The Melbourne-based bank revealed it may have to provide up to 500 million pounds ($775 million) to cover the British business against misconduct charges, out of 1.7 billion pounds it has set aside for such costs.
NAB last month exited from the United States and was ahead of its rivals in raising A$5.5 billion capital to meet tighter regulatory requirements - moves that have been lauded by investors.
NAB shares jumped 1.16 percent after the results and are up 0.2 percent so far this year compared with 1.4-4.7 percent drop for rivals Commonwealth Bank CBA.AX , Westpac WBC.AX and ANZ Banking Group ANZ.AX . The benchmark S&P/ASX 200 index .AXJO is up 1.7 percent in the period.
EARNINGS GROWTH
Cash earnings from its wealth management arm increased, on better investment markets, higher premiums and lower retail claims, NAB said.
Its tier-I ratio stood at 9.94 percent as at June 30. It is due to report full-year results in November.
In contrast to NAB's earnings, rival ANZ last week posted a spike in bad debts amid slower-than-expected earnings growth, sending its shares down 8 percent in a day.
CBA, which reports second-half results on Wednesday, is expected to post a drop in cash earnings compared to the previous half in part due to higher bad debt charges. It said on Monday it was working on several options to raise capital but no decision had been made.
Westpac, which reports quarterly numbers later this month, is also likely to show higher bad debts and slowing revenues, analysts said.
($1 = 1.3499 Australian dollars) ($1 = 0.6455 pounds) (Editing by Stephen Coates)