The PSIS, one of New Zealand's larger non-bank financial services outfits, saw its total assets glide past the $1 billion mark last month, chief executive Girol Karacaoglu said.

The member-owned co-operative, which sprang from the wreckage of the Public Service Investment Society after it foundered in 1979, reported a March year net profit of $7.86 million yesterday, down from $8.63 million last year.

Last year's result was boosted by the sale of the PSIS' health care business and Karacaoglu said the co-operative's investment in more branches, staff and IT had kept the lid on profitability despite strong growth in loans and deposits.

Total assets stood at $987 million at the end of March, but hit $1 billion in early May.

Loans, mainly on homes, were up 19.3 per cent at $827.1 million in the March year, while deposits were up 14.7 per cent to $829 million.

Since taking over at the PSIS three years ago, Karacaoglu has overseen a turnaround in declining membership with customer numbers up 2400 to 129,000 in the March year.

The new members, 60 per cent of whom are 45 or younger, are providing an injection of relative youth.

Karacaoglu said the biggest challenge now facing the PSIS was encouraging more of its customers to give the co-operative more of their business.

He said many customers put part of their business with PSIS "to exploit our extremely attractive low fees" while doing most of their day-to-day banking with one of the majors.

"As a co-operative we are saying, 'If you help us, we will help you and the way you can help us is if you do all your personal banking with us'."

As one of the larger non-bank financial institutions, and one that had a national presence, Karacaoglu said PSIS, while not losing customers to Kiwibank, was competing with it for disgruntled big bank customers.

PSIS research suggested that of every 100 customers who left the major banks, Kiwibank was capturing 60 and the PSIS was fighting it out with the Southland Building Society and credit unions for the rest.

Karacaoglu said there was "absolutely no doubt" that tougher times were affecting lending growth. "But to our surprise, given all the talk about a major economic slowdown, it is not that dramatic. It may slow from 19 per cent for the last two or three years to maybe around 15 per cent, but that's still significant growth."

Deposits would continue to grow in the order of 10 to 12 per cent, he said.