SBS Bank continues to increase its profit and assets in what its chairman says is proving to be a competitive banking market in New Zealand.

Chairman John Ward told the Otago Daily Times the Invercargill-based bank had focused on stability for the year ended March.

''We don't take undue risks, for obvious reasons. We focus on stability and on returns for our members.

''We are out there to protect the interest of our members and provide better returns to them.''

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But Ward said to improve the profit by $7.4 million, to the strongest ever in the financial year, was a great reward for the board and staff.

SBS reported a net surplus of $27.4m for the period, up 37 per cent from the $20 million reported in the previous corresponding period.

The bank's interest income fell slightly to $194.8m, but its operating surplus was up 33 per cent at $36.7m. Total operating income was up 8 per cent at $123.4m.

The residential lending market was difficult because it was so competitive, Mr Ward said.

However, while SBS Bank had been a key contributor, providing significant growth in both residential lending and retail deposits, the ''outstanding'' full-year result reflected strong performance across the entire group.

All three subsidiaries - Finance Now, FANZ and Southsure - outperformed their targets.

''When interest rates are going down on mortgage rates, it is more difficult to make money. By having a good spread across our book, that drives our asset growth.

''We have focused on providing a full suite of products.''

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The commercial facility allowed car loans and investments for businesses and had proved a positive market for SBS, he said. The executive team had worked on providing easier methods of banking, and that was paying off.

SBS was targeting young people in its latest market, focusing on helping people into their first homes. SBS was originally established to help people into their first homes and the bank had never lost sight of that purpose, Ward said.

Growth in Canterbury, Otago and Southland had again proved strong. All were rural markets, to a degree, and were reflecting increasing optimism.

Auckland was proving a valuable market for the bank. Although the bank had no physical office in New Zealand's largest city, it had provided mobile banking services for the past four years, he said.

Advancing funds for property and providing deposit support in Auckland had gone well. There was strong funding support in Auckland.

Asset growth of $582m was largely driven by the increase in residential lending. SBS members' equity was $270m, up 14.3 per cent at balance date, and the bank's capital adequacy sat well above the regulatory minimum, Mr Ward said.

Group chief executive Shaun Drylie said the result reflected the bank's strategy to make it easier for members to do their banking.

''We are investing in new technology, staff development and branch upgrades to ensure we continue to evolve to meet the changing needs of our members.''

The new mobile banking app and internet banking platform allowed members to bank wherever and whenever they wanted. The new ''virtual branch'' gave members who did not live near a branch, access to banking services, he said.

Mr Ward said although New Zealand's economy remained strong, experts suggested there might be a slow down in growth, citing housing market vulnerabilities and a dairy sector downturn as the biggest domestic financial risks.

The 2018 financial year would involve challenges but also opportunities.

SBS was robustly capitalised which allowed the executive and board to focus on a framework to continue protecting members' interests and improve results for them, he said.