(Adds context, further details on common equity ratio levels)...

(Adds context, further details on common equity ratio levels)

Feb 5 (Reuters) - Westpac Banking Corp (WBC) said on Monday its level of stressed assets fell slightly in the three months to Dec. 31, reflecting an improvement in the outlook for the dairy sector.

Australia's second-biggest bank by market value said stressed assets slipped about 2 basis points to 1.03 percent in the first quarter of its financial year, which began on Oct. 1.

Westpac's common equity Tier-1 capital ratio was 10.1 percent at end-December, a decline from the 10.6 percent reported at Sept. 30, 2017.

The bank said that it will seek to operate with a common equity Tier-1 ratio of at least 10.5 percent in March and September under the Australian Prudential Regulatory Authority’s existing capital framework.

Australian mortgage delinquencies, in aggregate, were largely unchanged for the quarter at 0.67 percent, the bank said in a statement.

Westpac did not disclose profit or revenue numbers in its limited first-quarter update. In November, Westpac's annual cash profit missed estimates, while full-year net interest margin slipped.