ANZ bank says an increase in lending and cost cutting are behind a 15 per cent increase in its annual profit which hit a new record high.

The country's largest bank made a net profit of $1.78 billion in the year to September 30 - up from $1.54b in the prior year and $9m higher than its 2015 net profit of $1.77b which was the previous record.

The bank increased its cash profit by 21 per cent to $1.86b.

Chief executive David Hisco said the bank's solid performance was down to lending growth and ongoing cost management.

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"Our expenses decreased 8 per cent in finance year 2017 and are below our 2010 levels, while we've maintained high customer satisfaction."

ANZ's New Zealand staff shrank to 7,755 as at September 30 from 7,869 a year earlier, although the bulk of that is in the group's Kiwi banking division where full-time equivalent staff was trimmed to 6,207 from 6,317 a year earlier.

ANZ's Melbourne-based parent company said operating costs in the New Zeland banking division "decreased as a result of a reduction in FTE [full-time equivalent staff] driven by automation and transaction migration to lower cost channels, partially offset by inflation".

Hisco said the result was also buoyed by a lower than normal provision charge. The bank's credit impairment charge dropped from $149 million in 2016 to $59m in 2017.

"The strength in some parts of the economy also meant fewer bad loans to contend with and a more benign credit environment saw the provision charge trend lower."

Lower levels of credit losses reflected improvement in credit quality in its retail, commercial and agri portfolios which were partially offset by new provisions.

ANZ's New Zealand lending business, which will see former Prime Minister John Key take over as chair in the new year, grew its mortgage book 5 per cent in the year to $72.35 billion, while commercial loans increased 1 per cent to $40.96 billion.

Total net loans were up 4 per cent to $117.24 billion, while customer deposits increased 7 per cent $81.86 billion.

Hisco said one of the highlights of the year was the growth in deposits while its KiwiSaver business also continued to grow with it now having 735,000 members with over $11 billion invested.

The bank's revenue increased 7 per cent to $4.08b with net interest income rising 2 per cent to $3.08b and other operating income up 26 per cent to $999m.

The heightened level of competition in the market continued to put the squeeze on net interest margin which shrank 6 basis points to 2.31 per cent in the year, although ANZ's New Zealand lending division increased return on assets 3 basis points to 1.22 per cent.

Hisco said the bank's net interest margin stabilised in the second half of its 2017 financial year after a period of contraction caused by increased funding costs and a switch by customers to fixed rate home loans.

ANZ's Australian parent company made a net profit of $A6.41b which was a 12 per cent increase on the prior financial year.

Andrew Bascand, managing director of fund manager Harbour Asset Management, said while it was a record result for the Australian bank, analysts had expected it to be a bit better than what it was.

He said revenue for the whole group was down 1 per cent while the analysts had expected it to be up half a per cent.

Bascand said banks were under pressure from tougher macro-prudential rules introduced by regulators in both Australia and New Zealand while the lenders themselves were being more cautious because of the slow-down in the property market.

He said ANZ had a strong capital position and had managed its costs well but its net interest margin was down and it had soft growth.

"It's a slightly softer result than expected. Revenue growth looks challenging in the future."

"The general trend leaves me a little bit underwhelmed," he said.

ANZ's dual-listed shares were down 12c to $34.20 on the NZX just after midday.

ANZ New Zealand annual result