The Bank of New Zealand has returned to profit, but the slow economic recovery is limiting earnings growth.
The Australian-owned bank made $602 million in the year to September, a turnaround from last year's $181 million loss, when it was hit by a substantial one-off tax bill.
The tepid economic recovery has restricted BNZ earnings, however, with the bank's retail arm, which also includes its business, agriculture and insurance operations, reporting a modest 1% rise in cash earnings to $524 million.
BNZ says the rise is due to improved margins, while money lent remained flat at $55 billion, with subdued growth in housing and personal lending, offset by weaker business lending.
Deposits, which has been a battleground for banks competing for funds, jumped 10% to $28 billion, lifting the bank's market share to more than 17.5%.
Money set aside to cover potential bad debts remained flat at $187 million.
BNZ's capital markets arm experienced a fall in earnings due to lower business activity and reduced market volatility.
BNZ chief executive Andrew Thorburn says he's not expecting a strong pick up over the coming year. The bank is expecting single digit growth as the tepid economic recovery curbs household and business lending.
Overall, the bank's parent, National Australia Bank, reported a 63% rise in profit to $A4.2 billion, boosted by a drop in bad debts.
