The Co-operative Bank has reported an after-tax profit of $6.7 million, down a third on the previous year.
Expenses around bad debts has gone up from $3.6m in 2019 to $8.2m.
Chief executive David Cunningham said while actual debt write-offs were lower, the increase provision of $6m was to reflect the likelihood of increased future credit losses at a result of the Covid-19 pandemic.
"These are not losses that have been incurred, they are our best expectations in terms what the losses might be over the weeks and months ahead on the existing loans portfolio and that was the primary reason for the decline in profit.
"The primary factors are forecasted unemployment rates, the change in house prices and the number of customers who have taken mortgage and personal loan deferrals."
About 2500 customers had now taken deferrals, Cunningham said.
"Those are probably more likely to ultimately default and potentially be a credit loss."
Although the impact of virus started at the end of the financial year, the effects on the results had been very significant, he said.
He said 2019's annual report spoke of building resilience with greater earnings to generate the capital necessary to grow.
Cunningham said that was now being put to the test as it faced the impacts of the Covid-19 with very strong capital and liquidity ratios.
He said the Co-operative Bank had not paid a rebate to its customers this year.
The bank had closed three branches - in Auckland, Wellington and Christchurch - but all staff at those branches had been reassigned, he said.