National Australia Bank posts 6 pct rise in 1st-qtr profit

* Q1 cash profit up 6 pct to A$1.65 bln

* Q1 net profit A$1.8 bln vs A$1.4 bln reported yr ago

* Overall revenue up around 4 pct, expenses down (Adds CEO comment, details on earnings, comparison to rivals)

SYDNEY, Feb 5 (Reuters) - National Australia Bank on Thursday posted a 6 percent gain in first-quarter cash profit as record low interest rates helped loan revenues nudge higher and after booking a small gain on sale of part of its UK commercial property loans.

Australia's economy has slowed as a decade-long commodities price boom unwinds, but bank profits have mostly continued to grow thanks to rises in mortgage lending and a tight rein on costs. NAB has underperformed its rivals, however, due to problems with its UK business.

"This is a solid first-quarter result, which has seen the continued strengthening of our core Australian and New Zealand franchise and the further reduction of legacy issues," NAB Group CEO Andrew Thorburn said in a statement.

"Australian home lending continues to generate strong growth and has now delivered 20 consecutive quarters of above system growth."

NAB, the country's fourth biggest bank by market value, posted cash profit of A$1.65 billion ($1.28 billion) for the quarter ended in December. Revenues rose 4 percent including the sale of the UK property loan portfolio, one of the legacy issues NAB has been keen to address.

Net interest margin, a key gauge of profitability for lenders, was flat and indeed slightly lower excluding the company's markets and treasury divisions. Charges for bad and doubtful debts jumped 30 percent to A$227 million but NAB said they were stable when economic cycle adjustments and provisions for the UK property portfolio were removed.

NAB's statutory net profit of A$1.8 billion rose versus the A$1.4 billion it reported a year ago.

The bank has made exiting its UK operations an "absolute priority" after writedowns for the troubled business led to a 10 percent decline in cash profits last year.

NAB's UK business, which includes Yorkshire and Clydesdale bank branches, has been a persistent thorn in its side, with charges for bad and doubtful debt responsible for annual profit declines four times since 2008.

NAB sold 1.2 billion pounds ($1.8 billion) of mostly non-performing UK commercial property loans in December.

NAB has a return on equity (ROE) of 10.9 percent, the lowest among its major peers. Commonwealth Bank of Australia (Other OTC: CBAUF - news) has an ROE of 18.7 percent compared with 15.9 percent for Westpac and 15.7 for ANZ Banking Group.

Last month, Fitch Ratings said profit growth for Australian banks is likely to slow in 2015 on higher impairment charges and net interest margins pressure from strong loan competition.

NAB shares have made a fast start to the year, gaining almost 9 percent compared with a near 7 percent rise in the S&P/ASX 200 index, as investors grappling with low returns seek companies with high dividend yields. ($1 = 1.2873 Australian dollars; $1 = 0.6586 pound) (Reporting by Swati Pandey and Lincoln Feast; editing by Andrew Hay and G Crosse)