Kiwibank's profit fell after the state-owned bank took a hit from lower fee income.

The state-owned bank reported net profit after tax of $108 million for the year to June 30 - 6 per cent down on the prior year's $115m.

Its net interest income rose 8 per cent to $445m, while its operating expenses were up 0.5 per cent to $375m.

The bank's loans and advances rose nearly 12 per cent to $20.4 billion, while its deposits were up 13 per cent to $18.2b.

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Kiwibank chief executive Steve Jurkovich said the bank had a record year for lending and deposit growth while margins remained firm and profits were down slightly.

Jurkovich said the fall in net profit was partly due to fee reductions made in the current year and one-off revenue received in the prior year.

Its net fees and other income were down 24.4 per cent to $90m.

"Significant growth was mainly derived through more customers choosing to join Kiwibank, contributing to a $34 million increase in net interest income."

The bank is going through a transition phase as its separates its physical branches from New Zealand Post, which owns 53 per cent of Kiwibank's holding company Kiwi Group Holdings.

Jurkovich said its commitment to leveraging technology and establishing more standalone branches to improve customer experience had led to an increase in investment costs for the period.

The bank said lower revenue was partly driven by a reduction of $12m in banking fees as well as non-bank products such as bill pay being returned to New Zealand Post lowering income by a further $7m.

Kiwibank also received less income from insurance payments - $12m lower than the prior financial year.

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"Kiwibank is adjusting its business strategy to meet the changing preferences of customers. We are investing in our own branches where customers wish to interact with us face-to-face, as well as developing our technology capabilities," Jurkovich said.

"Kiwibank and New Zealand Post businesses are responding to different customer demands. Although sometimes challenging, this move to increased independence for Kiwibank brings opportunity. In simplifying our business, we can focus on the areas that make the biggest difference for our customers and their long-term financial wellbeing."

The bank lent money to 2000 first-home buyers over the year and saw 3305 customers switch from other banks.

Jurkovich said the past year had been like no other, with the focus on bank reputation and culture.

"Our customer satisfaction results and corporate reputation ratings are higher than ever.

"That does not mean we are complacent - as an increasingly significant player in the financial services industry, Kiwibank will continue to focus on strengthening our unique culture, along with frameworks, and processes to ensure a safer and stronger bank that continually delivers on the long-term needs of our customers."

Jurkovich said he expected strong customer growth and investment in technology to flatten profitability until it had migrated to new technology platforms.