ANZ National, New Zealand's biggest bank, has posted a 7 per cent increase in interim profit in stark contrast to its parent ANZ and the world's biggest lenders.
The writer of one in three home mortgages in this country described its $520 million profit in the six months to March 31 as "solid," but wouldn't predict an annual figure.
The big unknown is whether growth in demand for loans that has driven New Zealand bank's profits, and offset tightening margins, will continue as the economy slows.
David Tripe, director of the Centre for Banking Studies at Massey University, said New Zealand banks were dependent on the housing market for lending growth.
"A slowdown in the housing market has potentially quite a significant impact on their overall performance," he said.
The ANZ National profit excludes $90 million from one-time items, most of which was from a payment from the listing offshore of credit card company Visa.
The bottom line profit of $610 million in the six months to March 31, was also up 7 per cent on the same period last year.
The profit rise was less than the double digit increase in the December quarter but still contrasted with a 14 per cent fall in interim profit to A$1.674 ($2) billion reported by Australian parent ANZ today.
It came after Bank of America reported a 77 per cent decline in quarterly profit and Citigroup posted a US$5 ($6.35) billion quarterly loss because of giant provisions for bad loans.
ANZ National's provision for bad debts of $93 million in the six months is up from $30 million in the same period last year. But net non-performing loans are just 0.12 per cent of net advances.
Provisions were coming off a very low base in New Zealand, ANZ National chief executive Graham Hodges said.
Dr Tripe said the provisions were "peanuts".
In fact, ANZ National has been making money out of the global market meltdown. Its institutional division posted a $128 million profit, up 11 per cent from the same period last year.
"That business has done very well on the basis of increased market volatility both in New Zealand and globally," Mr Hodges said.
ANZ National does not fund margin loans on shares, an area that hit its parent, or operate in the US subprime market.
"I think it (the profit rise) reflects the nature of the business that we do here as opposed to what is going on overseas," Mr Hodges said.
"And I think you haven't yet seen the full impact of the credit crunch flowing through."
Even ANZ National's finance company UDC is turning a profit and "remains incredibly strong" in a finance company sector that is imploding.
Asked about redemption rates at UDC, Mr Hodges said only that there had been some "contagion effect from the collapses in other finance companies".
UDC, which has the same credit rating as its owner, reported net profit after tax of $17 million in the six month period, up 6 per cent on the same period last year.
ANZ National resulted from the merger of ANZ in New Zealand and National Bank of New Zealand, a former Lloyds subsidiary.
The interim profit was achieved on flat net interest income of $1.01 billion. Lending increased by 14 per cent but there was a 14 basis point decline in the margins on that lending.
Home mortgages are 55 per cent of its lending, small business is 10 per cent and rural is 16 per cent. ANZ has about a 33 per cent share of the mortgage market in New Zealand. It increased market share in the rural market, mortgage market and lost a little market share in the deposit market and had held steady in the business market.
Operating expenses increased 3 per cent. The cost-to-income ratio reduced by 200 basis points to 44.1 per cent.
Australian banks have enjoyed strong credit growth on the back of 16 straight years of expansion, but analysts expect overall loan growth to slow with interest rates at a 12-year high.
Dr Tripe described the ANZ National profit report as "ho hum".
"There's nothing disastrous about it," he said. He said the increase in non-interest income by the bank was "quite spectacular" and related to a good performance by the institutional markets divisions.