KiwiBank chief executive Paul Brock hopes the worst of the bad debt provisioning is over.
The bank, which is a subsidiary of New Zealand Post, made $21.2 million in the year to the end of June - 54% less than a year ago.
The decline is largely due to the bank setting aside more money to cover bad debts, with provisioning more than quadrupling to $79 million.
The bank has been concerned about the the bad debt risks of firms and households in quake-damaged Christchurch, and nationally, some small businesses, whose incomes have been crimped by the lingering effects of the global financial crisis.
But Mr Brock hopes the worst of the provisioning is now over and says the bank is feeling more positive about the future, but with an uncertain global back drop.
He says Kiwibank's underlying performance is strong, and it has continued to grow despite the challenging conditions.
Mr Brock says lending rose by 10% and deposits rose by 14% during the year, which means the bank is not overly reliant on raising money from international markets.