The Australian owner of the Bank of New Zealand says its subsidiary has performed well, despite a slow economic recovery and the impact of earthquakes in Christchurch.
National Australian Bank says BNZ's earnings remain sound and revenue rose in the three months to June, with the shift from fixed to floating rates boosting margins.
The amount of money set aside to cover bad debts fell, as did the amount of late payment debt.
But the bank is concerned about bad debt in the business sector, while lending growth to firms remains subdued.
Overall, National Australia Bank's cash profit jumped 27% to $A1.4 billion in the June quarter, due to fewer bad debts, though it warned that conditions remained difficult.
Analysts are concerned the turmoil on financial markets pose a threat to Australasian banks as they depend on foreign capital to meet their funding needs.