Credit quality back to early 2008 levels 06 February 2015 4:43PM Ian Rogers Asset quality may have improved at a rapid pace over the last quarter across the industry, if the December 2014 trading update for National Australia Bank is any guide.NAB said the combined ratio of loans 90 days or more past due and gross impaired assets to gross loans and acceptances was 0.88 per cent at December 2014 compared with 1.19 per cent at September 2014.This ratio across all major banks was one per cent at September 2014 and has been in decline since early 2013.If NAB's combined ratio was reflected across the industry, asset quality would be at the levels reported on the cusp of the GFC in late 2008.The ratio of collective provision to credit risk weighted assets was 1.01 per cent at December 2014, compared with 0.83 per cent at September 2014, though a change in accounting standards rather than the underlying rise in credit quality explains some of this rise.The ratio of specific provisions to impaired assets at December 2014 remained stable over the quarter at 35.3 per cent.Rising property prices and lower interest rates may be the primary driver of improved asset quality rather than business lending.David Ellis, banking analyst at Morningstar, said: "it's not just house prices; with historically low interest rates more borrowers are paying more principal off quickly through prepayments."And fewer are getting into difficulty."Some people might expect SME loan losses to increase, but that's not the case."Ellis said NAB's experience may be replicated, but "more so, for CBA and Westpac".