Westpac is budgeting for a big rise in costs and bad debts because of the Covid-19 pandemic as its first half profit slumped by nearly 50 percent.
The bank's half year cash profit for the six months ended March was $297 million compared with $555m last year.
The big item to hit the bottom line was the $211m put aside to cover bad debts, against last year's $14m.
"Our entire outlook changed in the space of a couple of weeks as the country went into lockdown. This half year result reflects only the early impacts of Covid-19, and our initial assessment of the lending losses we're likely to see as a result," chief executive David McLean said.
"Westpac NZ has both the financial strength and the commitment to New Zealand to help support the economy to recover. Nevertheless, the Covid-19 impact on the economy will be felt in banks' financial performance."
Lending rose 6 percent on a year ago and deposits were up 8 percent, but the cost of doing business rose 13 percent as it invested more in systems and customer services.
Its interest rate margin, effectively a measure of its profitability fell to 2.06 percent from 2.23.
McLean said the bank had made nearly $10 billion dollars worth of mortgage, business, and consumer relief, through deferred or rearranged payments, and new loans to more than 24,000 customers.
He said the banking system and economy had been in relatively strong positions before the Covid-19 pandemic, and government and Reserve Bank steps had cushioned the impact, but the pressures would increase.
"Interest rates remain at all-time lows, which will help soften the impact on borrowers whose incomes have been reduced, and wage subsidies and mortgage deferrals give households and businesses time to regroup."
"However, low interest rates will make it harder for depositors who depend on their investment income, and will continue to compress bank lending margins," McLean said.