Deteriorating trends in asset quality at major banks in Australia over the June 2016 quarter received a sanguine analysis in a survey of quarterly reporting by Deutsche Bank sell side analysts Andrew Triggs and Anthony Hoo last week."Impaired asset balances rose by a lesser amount than 90 day arrears," Triggs and Hoo pointed out."Given impaired assets tend to require around ten times the level of provisioning than loans 90 days or more past due, this is positive from a bad debt perspective," they wrote.The analysts' report highlighted that the "biggest deterioration" over the quarter was seen in the New Zealand dairy sector, and said that, although there were more "direct mining/oil and gas exposures [that] saw ongoing deterioration in asset quality this quarter, the impacts were fairly modest." Measures of NZ dairy bad and doubtful debts continued to deteriorate for ANZ and CBA, while NAB's NZ dairy impaired assets rose another ten per cent, Triggs and Anthony Hoo highlighted.They provided context on the reduced significance of resources sector stress to bank credit quality over the June quarter (a reversal of the March 2016 quarter trend)."There was evidence of increasing indirect losses in retail and business portfolios from weakness in mining states," they wrote."Commercial property trends appeared to be reasonably benign, however this segment remains a risk into 2017 in our view."The analysts singled out Commonwealth Bank and Westpac as having flagged greater risks on asset quality over the short term than peers ANZ and NAB."While the movement in 90 day arrears and impaired assets look manageable, there were some early signs of further issues that may arise down the track," they wrote."Both Westpac and CBA showed increases in loans that are not yet in arrears, but are on watchlists. CBA's commercial troublesome assets rose by five per cent over the quarter, while Westpac's watchlist and substandard exposures rose by a significant 23 per cent."