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(Bloomberg) -- National Australia Bank Ltd.’s shares slid as much as 8.6% after first quarter earnings declined due to competition that pinched margins, while credit impairments rose at the nation’s biggest business lender.

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The Melbourne-based bank reported unaudited net profit of A$1.7 billion ($1.1 billion) in the three months ended Dec. 31, according to a statement Wednesday. The stock was down 6.8% as of 10:37 a.m. Wednesday in Sydney after earlier falling the most since March 2020.

The lender’s commentary adds to previously flagged concern from peer Westpac Banking Corp. earlier this week that pressure is building on margins. The Reserve Bank of Australia on Tuesday cut interest rates for the first time since 2020, adding additional headwinds as lenders moved to lower home loan rates.

NAB’s margin decline suggests that the bank is “hitting the brakes on business lending” said Bloomberg Intelligence senior industry analyst Matt Ingram.

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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.

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.

“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.

Higher impairments were a risk that could signal the bank won’t offer another buyback, Ingram said.

--With assistance from Anshuman Daga and Georgina McKay.

(Adds share price reaction from first paragraph, BI analyst comments in fourth)

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