(Reuters) -Australia's Westpac reported a 2% fall in annual profit on Monday but beat analyst estimates, as better-than-expected credit quality and stronger non-interest income offset rising costs and margin pressures from intense competition.

Annual operating expenses rose 9% to A$11.9 billion ($7.73 billion), driven by A$273 million in one-off restructuring charges, higher technology and transformation costs, and wage growth as the bank invested in hiring more bankers.

The bank's net interest margin - the spread between interest earned from loans and paid to depositors - declined 1 basis point to 1.94% amid persistent competition in lending and deposits.

Credit impairment charges, however, improved to 5 basis points of average loans from 7 basis points a year earlier, as cost-of-living pressures on households eased and business stress levels remained low.

The country's third-largest lender by market value reported net profit after tax of A$6.99 billion for the year ended September 30, compared with A$7.11 billion a year earlier and a Visible Alpha consensus estimate of A$6.83 billion.

It declared a final dividend of 77 Australian cents per share, slightly up from 76 cents a year earlier.

Separately, Westpac announced it had entered into an agreement to sell its A$21.4 billion RAMS mortgage portfolio to a consortium including Pepper Money, KKR and PIMCO.

($1 = 1.5389 Australian dollars)