HBOS Australia may be having more trouble with credit quality than any other bank at present, even though conditions were no worse in the second half than in the first half.Abbreviated financial statements show that impaired loans as a percentage of closing advances increased to 1.0 per cent at December 2006, up from 0.66 at December 2005. This ratio was 0.98 per cent at the half year.Impairment losses as a percentage of average advances increased to 0.27 per cent at December 2006, up from 0.19 per cent in 2005. Provisions as a percentage of impaired loans, however, fell to 46 per cent from 62 per cent in 2005.As was the case six months ago HBOSA explained these "primarily as a result of a small number of impaired corporate transactions on which the ultimate recovery rate is expected to be high."Managing director David Willis later said these exposures were mostly of a structured finance nature and across a range of industry sectors but wouldn't be more specific.