ASB Bank has posted a drop in its half year profit due to higher operating costs and more money being set aside for bad debt.
The Australian-owned bank's underlying profit fell to $365 million in the six months to December, down 2% compared with the same period a year earlier.
Stripping out one-off items, the bank's profit rose 7% to $348 million.
Net interest income rose, offset in part by higher operating and loan impairment costs.
Lending rose by 3% led by agriculture and business loans.
More households opted for fixed rate mortgages.
ASB chief executive Barbara Chapman says the rate for a three or four year fixed mortgage is now lower than the variable rate.
She says over the past two years people have opted for floating rates because they have been lower than most fixed rates.
Deposits also rose 3% to $38 billion, which ASB says reflects customer demand for low risk investment.
Ms Chapman doesn't see this changing, despite the stock market looking attractive. She says New Zealanders are looking for a spread of growth in deposits, including shares or bank investments.
Business lending also rose, which Ms Chapman puts down to a growth in confidence.
She says ASB business growth is due to more focus in the market, including a team of people dedicated to business, and increased confidence among business customers who have come through the financial crisis.
The amount of money set aside for bad debt doubled to $22 million due to lending growth.
Meanwhile, ASB's parent, the Commonwealth Bank of Australia, reported a 6% rise in its half year cash profit to $3.7 billion.