New Zealand's five largest banks are recovering well from the global financial crisis but margins will continued to be squeezed as new international banking rules take effect.
PricewaterhouseCooper's latest Banking Perspectives report looks at how well ANZ, ASB, BNZ, Kiwibank and Westpac fared in the last six months of the financial year.
The report found they collectively made $2.5 billion during the period.
The figure is a turnaround from the $76 million lost in the second half of 2009.
The report also found that the way the banks are making their money is changing.
Interest income earned by the five banks jumped to $278 million in the second half, up from just $10 million the previous half, as more customers switched to floating mortgage rates.
These are more profitable and they allow banks to pass on the costs of higher wholesale funding.
However PricewaterhouseCoopers financial services partner Sam Shuttleworth says that trend is unlikely to continue because the introduction of new international banking requirements will drive up the cost of wholesale funding over the next year.
He says business lending is also likely to remain subdued this year, as firms seek alternative funding sources and wait for more signs the economy is improving before taking on more debt.