ANZ New Zealand says firms are likely to continue to pay higher interest rates to more accurately reflect the risk to the bank of lending money.
The country's largest lender made $867 million in the year to September, a fivefold increase compared with the previous year. Underlying profit rose 40% to $882 million.
ANZ Group chief executive Mike Smith says most of the improvement is due to the lender reducing the amount set aside to cover potential bad loans, which fell by half to $461 million.
Lending fell slightly to $96 billion as households and firms reduced debt, but net interest margins rose to 2.27% in New Zealand, due to more people moving to higher value variable mortgage loans, while firms paid more to borrow money.
Speaking broadly about it, Mr Smith says there will be pressure on margins, but he is keen to maintain them.
"There is some way to go in terms of the improvement in margin in New Zealand," he says. "As the fixed (mortgage) rates reprice you do improve the margin."
However Mr Smith said credit cost in the commercial and middle market is here to stay for a time.
"I think we are charging for the risk properly now, and I think we have to resist some of the pressures to reduce this too much."