Kiwibank's holding company has reported a slight dip in profits as the bank battles increased funding costs and competition.

Net profits for Kiwi Group Holdings which also owns KiwiSaver manager Kiwi Wealth, New Zealand Home Loans and Kiwi Insurance, was down 0.8 per cent to $131 million for the year to June 30.

Profits for Kiwibank itself fell 2.4 per cent to $124 million but the group was bolstered by growth from its insurance and wealth business which now manages $3.9 billion on behalf of 158,000 KiwiSaver members.

Paul Brock, chief executive for the group, said the flat result reflected the challenging environment following global uncertainty and increased funding costs for banks; all within a very competitive market and during a period of significant investment in bank infrastructure and services.


While the bank's net interest income grew 3.3 per cent to $373 million its operating costs also rose 6 per cent to $301 million.

Brock said the last year was one of consolidation with significant progress in the integration of a new core IT operating system.

"There have also been major changes to our retail network with branch upgrades and the opening of the first standalone Kiwibank branch in central Hamilton."

Kiwibank deposits grew 7.6 per cent to $14.8 billion and lending and advances grew 7 per cent to $16.7 billion.

The bank said it now operated one million customer accounts with 419,000 people identifying the bank as their main financial institution.

Its market share of personal mortgages had remained static at 7 per cent while its share of business banking for small to medium enterprises had grown to 8.4 per cent.

The group is currently 100 per cent owned by New Zealand Post but a deal was announced in April where ACC and the New Zealand Superannuation Fund would buy a 45 per cent stake in the business.

In a statement released this morning New Zealand Post chief executive Brian Roche said the group was nearing the conclusion of its move to sell the stake with parties having completed their due diligence.


"We are now actively engaged with the parties to reach a timely conclusion of this transaction."

The sale was worth $495 million when it was announced in April valuing Kiwibank at $1.1 billion.

The update came as New Zealand Post announced a drop in profits as it continues to battle a declining letter business.

The state-owned postal business reported a net profit of $141 million down $2 million on the previous year ending June 30.

Revenue fell 6.6 per cent to $1.485 billion as the business continued to see a decline in letter volumes which fell 8 per cent.

Parcel volumes were up 6.4 per cent but parcel revenue was only up 2.9 per cent.

Roche said its profit was largely due to Kiwibank and the proceeds from the sale of a business in Australia.

Excluding one offs and Kiwibank the postal service business made a small loss.