Provision for bad debt has been increased by 45% to $NZ96 million.
The Australian-owned bank made a profit of $NZ400 million for the six months to March, a decrease of 4% on the same period a year earlier.
Profits from its banking operations, which include retail, business, farming, private banking and insurance, fell 5% to $NZ22 million.
The bank blames the decline on the rising cost of funding globally and a 45% increase in provisions for bad debt to $NZ96 million, which BNZ says is still historically low.
Like other banks, BNZ has moved to expand its lending away from mortgages to areas such as agriculture, resulting in a 16% rise in non-house loans to $NZ4.1 billion.
Meanwhile, the turbulence on financial markets helped its BNZ Capital arm to almost double revenue to $NZ135 million.
Separately, cash profit at its parent bank, National Australia Bank, declined 10% to $A2 billion as higher bad debt charges offset a stronger performance from its banking business.
Tamiflu stocks ready
Meanwhile, BNZ says it has up-to-date stocks of Tamiflu ready to deal with any outbreak of swine flu.
Banking has been identified as a crucial sector to keep functioning during any pandemic because people need to pay bills, buy supplies and access ATMs.
BNZ, which employs 5,000 people, says it is taking the swine flu threat seriously, ensuring staff are kept informed of the nature of the flu and latest developments.
ANZ National Bank has set up a special monitoring group and is also keeping staff abreast of developments.
Retail chain The Warehouse, which employs 8000 people, says it is well prepared to deal with a swine flu pandemic.