(Bloomberg) -- National Australia Bank Ltd.’s earnings declined in its first quarter as margins and higher credit impairments at the nation’s biggest business lender weighed on profitability.

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The lender reported unaudited net profit of A$1.7 billion ($1.1 billion) in the three months ended Dec. 31, according to a statement Wednesday. 

Slower lending to businesses — traditionally NAB’s strong suit versus its closest peers — reflects how intense competition among Australia’s largest banks for home loans is spilling over to business loans as the economy’s outlook deteriorates.

“The economic outlook is improving but cost of living and interest rate challenges persisted” during the quarter, Chief Executive Officer Andrew Irvine said in the statement.

Australia’s largest lender Commonwealth Bank of Australia grew its business loan book 11% in December while NAB grew 7% in a market that expanded 9%, Bloomberg Intelligence wrote in a report.

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--With assistance from Anshuman Daga.

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