ASB has posted a sharp rise in its half year profit, as margins improved and it set aside less to cover bad debts.
The Australian-owned bank made a cash profit of $372 million in the six months to the end of December, 31% more than in the same period a year earlier.
The amount set aside to cover bad debts fell more than $61 to $14 million.
Customer deposits rose almost 4% to more than $58 billion, but lending remained steady at about $53 billion, as borrowers remained cautious.
However, margins improved as customers shifted from fixed to floating mortgages.
ASB's chief executive Barbara Chapman says it has been able to leverage off the deposits.
She says if credit demand expands in New Zealand, banks will need to look offshore for more funding.
But Ms Chapman says currently there has been a growth in retail deposits, so ASB is largely funding the growth in credit to its customers through local balance sheets and deposits.
ASB's Australian parent, the Commonwealth Bank of Australia, reported a 7% increase in cash profit, to $A3.6 billion dollars, as a fall in loan impairment charges outweighed softening demand for mortgages and rising costs.