Huggins said the bank had worked hard to support its customers to invest in their homes and businesses over the half.
"New Zealand's resilience and success can be seen in our results."
BNZ's total lending grew 7.8 per cent to $97.8 billion supported by strong home loan growth while its deposits and other borrowings increased 9.1 per cent to $80.4b.
Huggins said it was seeing a slowdown in both home loan applications and settlements.
The official cash rate has risen steeply since August from 0.25 per cent to 1.5 per cent and more rises are expected as the Reserve Bank tackles rampant inflation.
Mortgage rates have also risen strongly. Huggins said BNZ had been preparing for rising rates for some time.
"We have been talking for some time about how interest rates were going to increase from those historical low levels. We have been testing customers against servicing rates that are materially higher than those lows and are even higher than they are today."
The bank increased its servicing rate by 50 basis points to 6.75 per cent over the half.
"We are confident customers will be able to meet the rates as they come up. Not withstanding that there are certainly going to be some customers that will find it challenging, that will need to think carefully about their household budgets and tighten up in some areas."
Huggins said it was also seeing a slow-down in business lending.
"But it very much depends on where you are and in what segment.
"Some segments there is good growth, others they need more working capital which we are providing, some segments are much slower."
BNZ chief executive Dan Huggins. Photo / Supplied
Huggins said the borders opening recently was positive for tourism and hospitality but it was still early days.
"We expect to see that continue to improve over the coming month and years, it is early but it is positive."
He said in terms of areas seeing good growth manufacturing was doing well as were businesses in discretionary spending areas.
The bank recorded a credit impairment charge of $21m compared with the $17m write-back in the March 2021 first half.
Chief financial officer Peter MacGillivray said the $21m recognised both individual and collective impairments on its loan book but was lower than its long-run average for impairments.
He said the rise in deposits reflected a significant amount of liquidity which had entered the market during the pandemic.
Savers had turned away from term deposits in the last few years with such low interest rates switching into transaction and savings accounts.
As rates were rising MacGillivray said that was turning back but was still not back to pre-Covid times.
BNZ also saw its net interest margin compress two basis points to 2.02 per cent. Huggins said that had been driven by market volatility.
He said the challenges ahead were pretty broad.
"There is certainly a lot of global uncertainty, inflation, interest rates, supply chains, labour shortages, we have also got the transition to living with Covid.
"Our focus will be on continuing to support customers through that period - on two fronts - we see a lot of opportunity for NZ businesses to innovate and grow and we want to be there to support businesses, at the same time we recognise that it is going to be challenging for some customers. Our focus is going to be on making sure we support customers."
Back to the office
Huggins said around 34 per cent of staff had been back in the office this week and the number had been steadily increasing.
"In terms of flexible working - one of the big benefits of Covid is we have learned to work flexibly and we really think that is here to stay.
"Our business is a relationship business we need people to be together, our customers expect us to be available to them face to face - but that flexibility is going to continue and we will work with that."
