(Adds CEO comment, more earnings metrics, industry context, shares)
By Swati Pandey
SYDNEY, Nov 2 (Reuters) - Westpac Banking Corp WBC.AX , Australia's No.3 lender by assets, on Monday posted a 3 percent rise in annual cash profit to a record A$7.8 billion helped by growth in mortgages.
Last month, Westpac pre-released its earnings as it raised A$3.5 billion ($2.54 billion) to meet new stricter capital rules and became the first lender to push home loan rates higher to protect profits.
Australia's four major banks are preparing for their slowest earnings growth since the global financial crisis amid record low interest rates and a cooling economy. Bad debt charges are ticking up even as regulators demand more cash be set aside against loan books.
Westpac CEO Brian Hartzer expects "Australian banks to continue to operate in a lower-for-longer environment with modest credit growth, intense competition and ongoing regulatory uncertainty."
The caution comes even as Westpac unveiled its best final dividend ever of 94 cents, taking the total annual payout to 187 cents a share, up 3 percent.
Hartzer, however, expects a pick-up in business credit and growth in wealth and insurance markets to help bank earnings, going forward.
Net interest income, the difference of interest earned and paid out, rose 6 percent for the year-ended Sept.30 while net interest margin, a key gauge of profitability, was flat at 2.09 percent.
Loan impairment charges rose 16 percent on higher write-offs and as the benefit from credit quality improvement reduced.
Operating expenses jumped 11 percent for the year led by technology investment and foreign currency impact as the Australian dollar depreciated some 13 percent this year.
National Australia Bank NAB.AX and ANZ Banking Corp ANZ.AX both missed expectations when they posted record cash profits last month. Commonwealth Bank of Australia CBA.AX follows a June-ending calendar year.
The four have together raised over A$20 billion ($14.51 billion) since May to comply with onerous capital rules.
Bank shares have underperformed so far this year as the fund raisings have diluted average returns to shareholders and on concerns about future earnings growth. Westpac shares are down about 5 percent this year to Friday's close compared with a 3 percent drop in the broader index .AXJO .