Westpac New Zealand has reported a solid lift in first half profit, but warns margins are under pressure as credit growth slows.
The bank's cash profit rose 15 percent to $555 million in the six months ended March, but just 7 percent when proceeds from the sale of its stake in the payments company Paymark was excluded.
Net operating income rose 6 percent to $1.25 billion.
The bank, which is owned by Australia's Westpac Group, said net interest margins were 2.23 percent, while customer deposits and loans each grew 4 percent year on year.
"The low margin environment and evolving regulatory outlook will present challenges into the second half of the year, but we have confidence in the fundamentals of the economy, and our capability to execute in response to change," said Westpac New Zealand chief executive David McLean.
"We've been investing money and resources into delivering new innovative banking products and services, and simplifying the banking experience."
He said the low-interest environment had benefited borrowers, with first home buyers particularly active.
However, credit growth was slowing as regulatory requirements were increasing.
Mr McLean said the bank was working with the Reserve Bank and Financial Markets Authority in relation to the regulators' recent Bank Conduct and Culture Review, which was sparked by an Australian enquiry into the misconduct of the banking financial services industry.
He said credit quality remained solid with bad debts at historical lows at $14m, compared with $38m a year earlier.
"General conditions have remained favourable on the farm with milk prices increasing and meat prices stabilising at comparatively high levels.
"We continue to support growth in the agriculture sector, with lending rising by 6 percent year-on-year and deposits increasing by 10 percent over the same period," said Mr McLean.
Funds under management in the Westpac KiwiSaver Scheme increased by 15 percent year-on-year, to $6.4b at the end of March, with a 15 percent increase in the average balance to $16,149.
Australia's Westpac Group reported a 24 percent drop in the first half net profit to $AU3.17b, with cash earnings down 22 percent.