A slowing housing market and higher costs have squeezed the profits of the country's biggest banks, according to a report from KPMG.
KPMG's quarterly financial institutions performance survey shows collective profits fell about 1 percent to $1.19 billion in the June quarter from the previous quarter.
The main cause was a rise in operating expenses, up 13 percent, as banks upgraded their IT systems and invested in new digital trading platforms.
But banks are finding the slowing housing market is restraining income growth and lending, which was at its lowest in two years.
Even so, net interest income rose more than 3 percent, and banks increased their margins as they benefited from the cheaper cost of funds.
KPMG head of banking and finance John Kensington said the banks were holding the line.
"The banking sector has a continued focus on sustainable and diversified lending, but at a lower rate than previously which is why we're seeing this relatively flat, albeit still profitable and strong, performance."
He said the easing housing market would continue to affect bank returns but it was not looking a threat.
"It certainly isn't a market collapse, but it is a slowing down."
Mr Kensington said the banks were also also having to invest and tighten their procedures to comply with anti-money laundering laws, which was adding to their costs.
Meanwhile, one of the sector's long serving chief executives is stepping down. ASB head Barbara Chapman will retire at the end of March, after seven years in the top position.
During her tenure the ASB's profits have nearly doubled to more than $1 billion. She said it was an appropriate time to hand over to a new generation.