Strong lending growth of nearly 9% helped ASB Bank lift annual net profit 3% to $705 million.
The bank, which is owned by the Commonwealth Bank of Australia, says its underlying profit growth was up 12% in the 12 months to the end of June with its profit margin rising from 2.16% to 2.25%.
Its customer deposits grew 6%, particularly in savings products.
Chief executive Barbara Chapman says the bank's profit growth was against the background of a steadily improving New Zealand economy.
She says the bank experienced lending growth across the board in retail, business, commercial and rural banking.
Ms Chapman says the bank has reduced lending to customers with deposits less than 20% during the last quarter in line with the Reserve Bank's wish for banks to decrease the amount of high loan to value lending.
She says competition amongst banks has shifted away from deposits and into home lending over the past 12 months.
Ms Chapman says ASB expects a continued lift in GDP in the next 12 months and it's possible the New Zealand economy could start to grow more quickly than the Australian one in 12 to 18 months from now.
Details of ASB's mortgage lending won't be revealed until it lodges its annual report, due some time before 30 September.