National Australia Bank (NAB) says demand for loans from businesses is still weak after its quarterly profit remained steady at $1.4 billion.
Australia's largest business lender said there had recently been a slight rise in demand from businesses, but warned that was no reason to expect a recovery.
"We have had many, many false starts in this area," chief executive Cameron Clyne told analysts on Tuesday.
NAB's unaudited cash profit of about $1.4 billion for the three months to June 30 was a similar result to the same period in 2011.
Analysts had expected a profit closer to $1.5 billion, and NAB's shares fell as a result, closing 35 cents, or 1.4 per cent, lower at $24.70.
The bank continued to post growth in its personal banking business due to aggressive campaigns on the interest rates it offers on deposit accounts and mortgages.
NAB drew solely on deposits to fund loans in the June quarter, reducing its exposure to volatile offshore funding markets.
But "intense competition" was still increasing the cost of attracting deposits, and that was likely to continue, Mr Clyne said.
NAB's unaudited net profit in the three months to June 30 was $1.2 billion, lower than the cash profit because of the cost of a restructure of its troubled banks in Britain.
"The group's performance in the quarter was satisfactory given the challenging operating environment," Mr Clyne said.
Bad debt charges in business lending rose in the June quarter, due to higher provisions on existing loan impairments.
Mr Clyne said the recent, modest lift in business lending was a result of lending to institutional borrowers.
"Confidence has been subdued, and that's still meaning SME (small and medium enterprise) credit growth is still pretty weak," he said.
"The uptick has been institutional.
"But we've seen many false starts in this so I'm not quite prepared to say the funnel is unclogging."
NAB's revenue in the three months to June was one per cent lower than in the three months to March, due to higher funding costs for its UK business and the impact of weak financial markets.
NAB did not reveal its net interest margin, a measure of profit made on loans, for the June quarter, saying it was too volatile.
The bank's executive director of finance, Mark Joiner, said customer margin - NAB's own measure of margins on lending, deposits and funding costs - was flat compared to the previous quarter.
Morningstar analyst David Ellis said NAB's personal and business banking divisions continued to show momentum, but the group was being weighed down by its UK business.
Analysts still expect NAB to improve on its record $5.5 billion fiscal 2011 profit when it reports its full year results in October.