A fall in bad loans has boosted Westpac New Zealand's bottom line. The Australian-owned bank made a profit of $322 million in the year to September, an increase of 36% on the previous year.
The slow recovery has curbed net interest income, which declined 3% to $1.2 million because higher funding costs offset a rise in loans.
As with other banks, however, the improving economy has lessened the risk of people, firms and farmers defaulting on their loans, with money set aside to cover potential bad debts falling 39% to $347 million.
Mortgage lending jumped, while business lending rose modestly, particularly to farmers, though consumer spending fell because of the slowdown in household spending.
In the battle to attract local savings to meet new Reserve Bank rules, Westpac lifted deposits by 6% to $30.5 billion.
But net interest margins - the difference between borrowing costs and lending prices - fell as it paid more to secure funding from savers here and offshore.
Westpac chief executive George Frazis says margins are likely to stabilise over the coming year, and he expects low single-digit earnings growth but is confident the bank will continue to gain market share.
Overall, Westpac Group's annual profit rose 84% to $A6.3 billion, as bad debts tumbled.