The Bank of New Zealand's first half profit has fallen as it felt pressure on its margins and a fall in the valuer of some investments.
BNZ Wellington. Photo: RNZ / Alexander Robertson
The bank, totally owned by the National Australia Bank, made a net profit of $416 million for the six months ended March, 8 percent down on last year.
However, the preferred cash profit measure, which removes movements in the value of financial instruments, was up 9 percent to $484m, as it cut its bad debts and earned more from its lending.
"The current strength of the New Zealand economy is delivering benefits and challenges, which is reflected in very sound credit quality and lower bad and doubtful debts, but with increasing margin compression as credit growth continues to exceed deposit growth in the system," said chief executive Anthony Healy.
The BNZ's total revenue fell almost 5 percent to just under $1.1 billion but its expenses were also lower, and its bad debts level was nearly halved from last year to $43m, on the back of an improved dairy sector.
Mr Healy said the bank's interest rate margins were being squeezed because it was costing more to borrow overseas to meet growing demand for credit, although the bank was attracting more deposits from local savers.
However, he said the pressure on margins and higher cost of borrowing would continue.
"Today there are more people looking to borrow, so banks are paying more to win customers' deposits so this will lead to higher lending costs being passed through to borrowers."
Mr Healy said the BNZ would press on with using digital technology to automate more of its business and speed up dealing with customers which would mean fewer people in parts of its business.