CEO John Stewart has been called in to turn NAB around

Increased competition and rising costs have also taken their toll, producing what boss John Stewart called a "poor and unacceptable result".

Profit in the six months through 30 September was 1.61bn Australian dollars ($1.2bn) from A$2.04bn a year earlier.

NAB said there are "no quick fixes" and warned earlier this year that it will take until mid-2005 to recover.

Unchecked

The bank is trying to bounce back from the revelation that rogue traders cost it A$252m in unauthorised foreign exchange deals.

The scandal has cost a number of top executives their jobs and prompted strong criticism from regulators.

Analysts said that while the figures may seem disappointing, NAB looks as if it is bringing out all the bad news this year to prepare for a better 2005.

"Profits have to rebound at some point," said William Ammentorp of Macquarie Equities. "Our view remains positive."

He added: "It looks like they've pulled a lot expenses and accounting policy changes into this year - it looks like they are making this year look as bad as possible."

NAB said that it has had to increase spending on advertising and cut its fees as competition in the domestic market hots up.

The lender also will keep looking for buyers for its European Banks.