The country's biggest retail banks increased their profits by more than 5% in the three months to June.
KPMG's latest analysis of the banking sector shows net profits rose by $52 million to more than $1 billion. Profits had increased by nearly 13% the previous quarter.
KPMG head of financial services John Kensington says the main driver of the growth was in non-interest income, where banks use financial instruments to manage risks.
However, banks managed to increase their margins by about 2% in the quarter, which Mr Kensington says is an achievement considering more people are moving from floating to less profitable fixed mortgage rates.
He says the banks may be able to extract a greater margin with the first wave of mortgage holders who shift from floating to fixed rates.
Mr Kensington says as the trend to fix mortgages increases, the bank's ability to extract that margin may disappear.
He says if a trend towards fixed mortgages continues there is likely to be some pressure on bank margins.
ANZ, which is New Zealand's biggest lender, saw its profits rise 4.5% in the quarter to $375 million, followed by BNZ with profits of $238 million.