Profits at Kiwibank have fallen by 13% as strong competition for domestic retail deposits hit its margins.
The bank, a subsidiary of state-owned New Zealand Post, made $45.8 million in the year to the end of June, down from $52.5 million the previous year.
Lending increased by 23% to $10.4 billion and retail deposits lifted by 3% to $6.9 billion.
Revenue dropped slightly from $301.7 million to $301.4 million.
The bank's chief executive, Sam Knowles, says it has come out of the world recession in strong shape despite the drop in profits, which he says is primarily because of increased funding costs - a global phenomenon.
Mr Knowles says Kiwibank's market share increased to 7.8%, from 6.9% last year.
The quality of the bank's lending is holding strong, with only 0.3% of loans considered impaired, the lowest of New Zealand's main banks.
The Government has also agreed to provide uncalled capital support to NZ Post to help support its credit rating and enable the bank to continue its growth plans.