National Australia Bank has posted a 3 per cent drop in third quarter unaudited cash earnings to $1.6 billion as the bank flagged rising bad debts.
Cash profits were down 3 per cent for the June quarter, with bad and doubtful debts jumping 21 per cent to $228 million.
"The Australian and New Zealand economies remain resilient and continue to deliver growth amid heightened global uncertainty," said chief executive Andrew Thorburn in a statement to the ASX.
"These higher funding costs contributed to our decision to not pass on all of the most recent RBA interest rate cut to home loan borrowers.
"The decision reflects the responsibility we have to balance the needs of all stakeholders — borrowers, depositors and our 584,000 shareholders."
NAB said its expenses fell 1 per cent on tighter control costs.
Bad loans have continued to be a thorn in the side of banks. Earlier this month Westpac also reported a rise in bad debts, including a rise in the number of Australians who cannot keep up with mortgage payments and more stressed assets on its business loans.
Commonwealth Bank's full-year result and ANZ's trading update last week also pointed to a slide in credit quality.