National Australia Bank on Thursday announced the country's biggest ever rights issue to raise Aus$5.5 billion (US$4.4 billion) while detailing plans to demerge its British banking business.

The country's fourth biggest lender outlined its proposals as it posted a net profit of Aus$3.44 billion in the six months to March 31, a 20.4 percent jump from the previous year.

Its cash profit, the industry's preferred measure which strips out volatile items, rose 5.4 percent to Aus$3.32 billion, with its six-monthly dividend remaining at 99 cents.

The numbers came as the bank went into a trading halt ahead of the capital raise, primarily to bolster its balance sheet and provide a buffer to meet tougher regulatory requirements, which will likely see higher reserve capital requirements.

It will offer 194 million new shares, around eight percent of its issued capital, at Aus$28.50 each, a deep 19 percent discount to Wednesday's closing price.

The raising is the biggest ever in Australian corporate history, exceeding the Aus$4.4 billion mining giant Rio Tinto drummed up in 2009.

NAB chief executive Andrew Thorburn said it would help the bank exit its troubled British operations, which include Clydesdale Bank, by the end of the year.

Before it can do that, British regulators have told NAB it needs to shore up Clydesdale's balance sheet to protect it against potential losses linked to past problems, including misconduct issues.

"In relation to exiting our UK banking business, we have been examining a broad range of options including those provided by public markets," said Thorburn.

"It is a priority to exit this business, and we are today announcing our intention to pursue a demerger and IPO of the UK banking business."

- Huge raising -

He added that a strong balance sheet had always been a priority at NAB "which is why we are today announcing that we will be raising $5.5 billion of capital through a rights issue".

"The capital raising facilitates our proposed exit from the UK banking business and positions us ahead of anticipated regulatory changes.

"While there is still much more to be done, we are clear about our priorities and are focused on what needs to be achieved," he added.

The bank will look to demerge 70 to 80 percent of Clydesdale to NAB shareholders while the remaining 20 to 30 percent will be sold through an initial public offering to institutional investors.

The size of the raising came as a surprise to analysts.

"It's a huge raising," IG strategist Evan Lucas said, adding that NAB was unlikely to have trouble getting the money but it would deliver a significant blow to its share price.

"In the longer term it's probably responsible but in the short term it'll be a market headache," he said.

Watermark Funds Management investment analyst Omkar Joshi saw the capital raise as a positive.

"Overall, a solid result by NAB with very pleasing progress on its divestment of non-core businesses as well as being ahead of peers in regards to dealing with higher capital requirements," he said.

Shares in Australia's big banks had already taken a hammering this week on the back of generally weak interim results or trading updates and they were down again Thursday.

Commonwealth Bank, Australia's largest-listed firm, was marginally in the red after shedding nearly six percent the previous day, while Westpac and ANZ were also weaker.