More than a third of Lloyds Banking Group's loans to Australian borrowers are impaired, the half-year financial report for the UK bank, published last night, shows.Lloyds put the percentage of loans classified as impaired at 35.2 per cent at the end of June 2011, up from 28.7 per cent at the end of December 2010.The level of impaired loans increased by £353 million, or eight per cent, to £4.540 billion over six months.Another driver of the lift in the percentage of impaired loans is repayments on performing loans.The charge to the income statement for bad debts in the latest half was £586 million, but this at least was a decline from the £908 million charged to the P&L in December. In June 2010, the charge for bad debts was £454 million.No other measures of the group's losses from its Australian arm are available from the financial statements for the group.Management commentary does state that Lloyds' corporate and asset finance business in Australia is "of scale and profitable…. These ongoing businesses will continue to be managed for maximum value whilst maintaining a tight focus on running off the legacy commercial property exposures."The bank noted it was "heavily exposed to Australian non-metropolitan and New Zealand real estate markets where market conditions remain challenging and asset valuations continue to decline." Lloyds also took a charge of £70 million as a result of losses arising from the Christchurch earthquake in New Zealand.