The business banking market will come under greater margin pressure as lenders chase scarce lending opportunities with increasingly competitive offers. This was the picture painted by National Australia Bank executives at the bank's interim results presentation yesterday.Business banking is NAB's powerhouse, contributing around 40 per cent of group profits. But it didn't get out of second gear during the past six months.Business banking made a cash profit of A$1.2 billion for the six months to March - 1.9 per cent below the previous corresponding period, but 8.3 per cent up on the previous half.Net operating income rose just 0.2 per cent over the previous corresponding period and 1.2 per cent over the previous half. Assets grew 1.6 per cent over the previous corresponding period.NAB's group executive for business banking, Joseph Healy, said there was not a lot of lending activity at either the institutional or SME end of the market. The division achieved a three per cent increase in its net interest margin over the last six months by re-pricing loans. This will be harder to do in the future, however.Healy said: "Institutional margins are coming under pressure and will be a feature going forward in the near term."We are seeing more pressure in the SME book on pricing, although it's not to the same degree that we've seen in the institutional book. "The factor at play in the SME book is anaemic demand for debt. There are a lot of banks competing for very little activity and that does put pressure at the margin on new business. We're not seeing that feeding into our stock yet. "I would not want to be complacent because the reality is that there's a lot of pricing pressure in the market."On the positive side, the division's bad debt charge fell over the past six months, and asset quality is sound. The bad debt charge fell from $483 million in September to $520 million in March.NAB's executive director of finance, Mark Joiner, said 90-day past due and impaired loans fell over the last year.NAB's chief executive, Cameron Clyne, said another positive sign was that the commercial property market in Queensland, a long-time trouble spot for lenders, was stabilising.Clyne said: "We are a little more optimistic about the commercial property outlook and the charges we might experience there. The most troubled area of commercial property is south-east Queensland, but it does appear to be finding a bottom."