Australia and New Zealand Banking Group said on Friday its impaired assets rose 5% in the third quarter, as the bank relaxed lending norms to boost market share amid a sluggish economy.

Gross impaired assets for Australia's fourth largest bank by market value rose to A$1.97 billion ($1.33 billion) in the quarter ended June 30 from A$1.88 billion a year earlier.

However, the easier lending requirements coupled with quicker processing of loan applications led to a rise in home loan applicants in July, ANZ said in a limited update.

Australian regulators have been easing lending conditions with the country's central bank delivering interest rate cuts to revive a sluggish economy.

"We are seeing an increase in application volumes following the policy and process changes, next stage is to maintain that and see it translate into settlements over the coming months," ANZ's Group Executive for Australia retail and commercial Mark Hand said.

The lender's common equity tier 1 ratio stood at 11.8% at the end of the quarter, higher than 11.5% at March 31.