A 16 per cent drop in the Bank of New Zealand's net profit after tax was due mainly to lower gains on financial instruments, affected by the falling kiwi dollar.
The local unit of National Australia Bank reported how its $536 million net profit after tax in the September half-year dropped to $451 million in the latest March half-year.
That was partly due to a less spectacular result made from gains on financial instruments, down from $189m in the September half-year to $55 million in the latest period.
Adrienne Duarte, BNZ chief financial officer, cited the falling New Zealand dollar relative to major currencies as part of the reason for that change.
Cash earnings, which took out hedging gains and losses, was a more relevant half-year profit figure, she said, and that had only fallen by $22 million between the two March half-years.
Anthony Healy, BNZ chief executive, noted the competitive environment and increased funding costs due to offshore market volatility.
Total operating income for the six months to March 31, 2016 fell from $1.26 billion to $1.13 billion.
Duarte was asked if she was concerned about the economic risks of runaway Auckland house prices.
"No. The real issue for Auckland is affordability and the impact on people who want to buy a home. We have a housing shortage in Auckland," she said. "Migration continues into New Zealand and it's very, very strong, close to 75,000 for this year. This is not a bubble. It's being driven by unmet demand."
Healy said two areas were of particular interest in terms of growth.
Bank of New Zealand
• Half year to March 31, 2016 Half year to September 30, 2015
• Net interest income $882m $885m
• Gains less losses on financial instruments $55m $189m
• Operating income $1.13b $1.26b
• Net profit after tax $451m $535m
"Our Auckland growth strategy has delivered strong volume growth within our existing risk appetite. We've targeted the SME and housing segments in Auckland and both have seen strong volume increases compared with last year," he said.
Average house lending volumes rose by $1.7 billion or 5.3 per cent on an annualised basis and business lending was up $3 billion or 9.1 per cent.
Duarte said the bank's share of the mortgage market had risen.
"If you look at our market share of housing lending, it's up .03 per cent. We're growing slightly faster than the market overall," she said.
BNZ's charge for bad and doubtful debts jumped 83 percent in the first half as it doubled its provision against its dairy book. The charge for bad and doubtful debts rose to $84 million in the six months ended March 31, 2016 from $46 million a year earlier. The charge contributed to a 3.3 percent decline in cash earnings to $404 million.
Duarte said bad debts in the March year were slightly down on the September half-year.
"This is because we are providing for a lower-for-longer scenario in the dairy sector: the dairy price being lower for longer. We don't anticipate the dairy price recovering until 2019," she said, adding that the $46 million figure was at a very low point in the cycle.
"Actually, $84 million is in line with the long-term economic cycle," she said.
BNZ had also adopted a new accounting standard which recognised bad and doubtful debts sooner in the cycle, she said.