Shares in the National Australia Bank sold off yesterday after analysts were unimpressed with the way the bank converted higher loan interest rates into a boost for its net interest margin.

The shares fell more than 8% at one stage in early trading and ended the day down 6.4% at $26.72.

The fall was significant for the broader market because without it, the ASX 200 would have notched up a small rise instead of the 0.6% or 4.3 points it ended up losing on the day.

Thursday's fall took the fall year to date to 11% and around 17% over the past year.

The fall came despite shareholders in the National Australia Bank getting a 14% lift in dividend (to 83 cents a share) on a 17% improvement in cash earnings to $4.07 billion for the six months to March 31.

The NAB's half year performance was much stronger than that of the Commonwealth Banks's interim which revealed a 9% lift interim earnings to $5.15 billion.

While the NAB's net interest margin (NIM) rose 21 points (0.21%) to 1.77%, it was less than forecasts from analysts (who, it must said do get their forecasts wrong at times).

Analysts said the smaller rise in the NIM (the source of most of a bank's earnings these days) would see a downgrade in earnings estimates for the rest of the year and 2022-23 as a whole, and a fall in the share price as a result.

Both Goldman Sachs and UBS expressed concerns about the result.

UBS analysts said, "the standout for us was NIM only rising 10 basis points versus the previous half year with NAB calling out peaking NIM in Dec 22 of 1.79%, with a [second quarter] exit NIM of 1.76%. This result in our view confirms consensus is likely to revise EPS down further."

And yet bad loans and arrears hardly moved in the six months - and they have been a continuing concern for analysts since the Reserve Bank started lifted interest rates a year ago.

So far the higher home loan and business rates haven't triggered a surge in delinquencies and arrears.

NAB said charges for impaired loans rose from $3 million to $393 million, partly because of higher provisions to reflect lower house prices, but the bank did not report a rise in mortgage arrears. The proportion of customers who were 90 days or more behind on their repayments stayed flat at 0.66%.

NAB said its total loans grew 6.2% in the half and deposits were up 8.4%, helped in part by its purchase of Citi's Australian retail bank last year.

Its flagship business banking division posted 20% earnings growth to $1.7 billion, while cash earnings in personal banking dipped 0.4% to $785 million.

The NAB indicated it had slowed home lending in favour of higher lending to business, which has been its traditional strong point.

The ANZ releases its first half results this morning (Friday) and the rough handling of the NAB by the market could see a rough reception for the other Melbourne-based bank?

Macquarie Group its full year figures today as well, Westpac announces its half year figures on Monday, and the CBA releases its third quarter update next Wednesday.