(Adds details of loan impairments, background on rivals' results)
SYDNEY, Nov 7 (Reuters) - Commonwealth Bank of Australia CBA.AX , the country's biggest bank by market value, on Tuesday reported flat first-quarter unaudited cash earnings of A$2.4 billion ($1.85 billion) and a slight decline in bad debts as a proportion of loans.
Group net interest margin for the three months ended Sept. 30 was lower because of higher funding costs, CBA said in a limited trading update, without giving a number. Last year, it had disclosed unaudited first-quarter cash profit of A$2.4 billion.
Troublesome and impaired assets for the quarter increased slightly to A$6.8 billion because of ongoing stress in the New Zealand dairy sector but fell as a proportion of loans, CBA said.
Loan impairment expenses of A$322 million in the quarter equated to 18 basis points of gross loans and acceptances, compared with 19 basis points in the financial year ended June 30.
Australian bank returns have been under pressure from higher wholesale funding and deposit costs, as well as regulatory changes requiring them to hold more capital against their mortgage books to provide a more level playing field for smaller banks the last two weeks, rivals Westpac WBC.AX , Australia and New Zealand Banking Group ANZ.AX and National Australia Bank NAB.AX all reported flat or declining cash earnings for the financial year ended Sept. 30 = 1.2953 Australian dollars)