ANZ National, New Zealand's largest bank, said its provisions for bad debts could be double the $286 million last year.
"The New Zealand economy has contracted sharply with delinquencies subsequently rising strongly off a historically low base but within expectations," the bank said in an update ahead ofits interim result on April 29.
The bank said business lending arrears in New Zealand remained on par with the end of 2008.
Unsecured lending delinquencies, including those on credit cards, had grown.
The bank also said it would take a charge of A$130 million ($165 million) for ANZ's 49 per cent share of the costs associated with the offer to investors in two of ING New Zealand's frozen funds.
ANZ has been accused of pushing the ING products to its clients as being like term deposits. ANZ owns 49 per cent of ING New Zealand, which suspended withdrawals from two funds worth $521 million, affecting 8000 investors.
The Commerce Commission, which oversees fair trading law, is investigating the issue.
"The ultimate cost to ANZ will depend on the final value of the units and recoveries under ANZ insurance policies," the bank said yesterday.
Commenting on its overall New Zealand business, ANZ said volume growth had been flat and margins were under pressure due to higher wholesale funding costs, competition for deposits and costs from customers breaking fixed mortgage contracts.
