ANZ Group (ASX:ANZ, NZE:ASX) on Thursday reported a third-quarter cash profit higher than last year, helped by lower bad-debt deductions, while the bank, like its peers, saw a significant drop in mortgage applications after Australia's property tax policy shift.

The bank's cash profit in the third quarter rose 2% to AU$1.9 billion, with operating income falling 1% to AU$5.61 billion.

The dual-listed bank reported total capital of AU$98.36 billion, down from AU$96.83 billion, while Common equity tier 1, a measure of the bank's safety cushion, rose to AU$59.31 billion from AU$56.94 billion.

Similar to its peers like Westpac and Commonwealth Bank of Australia, ANZ reported a 12% drop in new home loan applications between the Australian federal budget announcement in May and the end of July.

Jefferies noted that the bank's cash profit is less flattering due to "very low" bad debt deduction charges in the quarter, hence making the profit less reflective of the bank's underlying business.

The investment firm believes that fewer revenue tailwinds remain available to the bank and controlling expenses now becomes the main way for it to improve earnings.

Jarden also said that Australian banks have a "cost problem," which can be helped by ANZ's acquisition of Suncorp, while adding that the bank is also expected to outperform peers if the favorable debt cycle comes to an end due to its asset quality.