New Zealand's banks had a bumper 2014, with home loan demand amid a booming property market helping to boost their combined profit by more than 20 per cent to a record $4.8 billion, a survey says.

Professional services firm KPMG, which conducted the survey of 23 registered lenders in this country, said banks also benefited from favourable funding costs and a decline in bad debt expenses, which fell 47.4 per cent last year.

One-off gains in non-interest income contributed $656 million to the $4.8 billion combined bottom-line result.

But even if that contribution was removed, the banks' overall profit still would have increased, KPMG said.

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John Kensington, head of financial services at KPMG, said the property market, particularly in Auckland and Christchurch, had fuelled much of last year's profit growth, with lending to the housing sector representing 53 per cent of banks' business.

"The Reserve Bank of New Zealand governor Graeme Wheeler has signalled his concerns over the possible economic effects of a sharp correction in the market, but it's widely viewed that strong real estate activity is ultimately a supply and demand issue," he said.

"Strong business confidence, fed by a growing economy, low inflation, falling oil prices and strong immigration, could create an environment for rising house prices."

Barfoot & Thompson data this month showed January's average sale price in Auckland was $757,319.

KPMG said banks' wholesale funding costs had continued to decline, despite four increases in the official cash rate (to 3.5 per cent) last year.

That was allowing banks to maintain profit margins in the face of competition in the home loan market, which was driving down interest rates. Incentives for borrowers such as cash, iPads and televisions are commonplace.

The "big four" Australian-owned banks reported a combined cash profit of $4.1 billion in this country last year.

That included $1.7 billion from ANZ, $864 million from Westpac and $807 million and $776 million from BNZ and ASB, respectively.

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Mr Kensington said there were some clouds on the horizon for the banking sector, not least the downturn in dairy prices and the financial pressure that could place on farmers.

"A fall in the asset quality of the dairy sector could impact the banks as dairy loans represent around 67 per cent of total rural lending."

The banks paid over $2.5 billion to around 25,000 employees last year, as well as roughly $1.8 billion in tax.

Big four cash profit 2014

ANZ: $1.7b

Westpac: $864m

BNZ: $807m

ASB: $776m