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Feb 19 (Reuters) - Australia's Westpac Banking Corp (WBC) on Monday said its first quarter unaudited net profit was lower than its prior six-month's quarterly average, citing the impact of notable items related to hedge accounting.

Westpac's margins also took a hit in the first quarter as nearly two years of high interest rates raised cost of mortgage repayments. That along with sticky inflation spurred intense competition among banks which has now flattened their profit margins.

"From a credit quality perspective, we saw a reduction in business stress while a rise in 90+ day mortgage delinquencies reflects the tougher economic environment," CEO Peter King said.

Mortgage payments delayed for more than 90 days in terms of the bank's total loan book for Australia stood at 0.95% as at December-end, nine basis points higher September-end.

The country's no. 2 mortgage provider's unaudited net profit for the three months ended Dec. 31 was A$1.5 billion ($978.60 million), down 6% from the quarterly average for the prior six months. That compares with Visible Alpha consensus estimate of A$1.65 billion, according to Citi.

The bank's common equity tier 1 ratio, a closely watched measure of spare cash, stood at 12.3% as at December-end, down from 12.4% as at September-end.

($1 = 1.5328 Australian dollars)