Low profits and a static lending market are two issues expected to dominate the New Zealand banking industry this year.
Analysts say the four main Australian-owned banks are at the mercy of what happens offshore.
As banks face another year of weak profits, the race is on to secure low-cost funding. Covered bonds are proving a popular option.
The Financial Times in London reports that January is proving one of the busiest months in more than a decade for global covered bond sales - so far this year $US43 billion has been raised.
Covered bonds are backed by cashflows generated from an underlying investment pool such as mortgage or public sector loans.
They are popular because they are ringfenced for investors even if the issuing bank collapses.
Ernst & Young partner Chris de Wit says the global financial crisis has forced banks to look at innovative ways of raising cash and Australian-owned banks are ahead of the world in issuing covered bonds.
Analysts say wholesale funding markets will continue to be tight in 2012, putting pressure on the balance sheet.
PWC financial services partner Sam Shuttleworth says weak loan growth is also hurting profits.
Retail banks in Australia are expected to axe 7000 jobs in the next two years.
Massey University's banking department head David Tripe believes New Zealand job cuts won't be on the same scale.
But banks here face other cost pressures. Chris de Wit says New Zealand is lagging the rest of the world in regulatory changes, as well as long delayed infrastructure replacement.
On the upside Mr Shuttleworth predicts retail deposits will grow and bad loans will be less of a burden.
And Dr Tripe says there's no sign of a mortgage war breaking out this year but he will be watching how the Australian parents deal with the New Zealand banks' low profits.