Meeting changing customer expectations is the biggest challenge ahead for the Bank of New Zealand, according to its chief executive Angela Mentis.
The bank delivered its second best financial result this morning amid a backdrop of increasing regulatory pressure and miss-trust from the public.
Strong lending growth boosted its profit by 9.8 per cent to $1.029 billion - just shy of its record 2015 year in which the bank made $1.038b.
Its operating revenue also grew 6.2 per cent to $2.505b for the year to September 30, while cash earnings for the New Zealand segment rose 6.7 per cent to $1.004b
Mentis said strong lending growth to businesses and homeowners was behind the result.
"For me it is really a great reflection of New Zealand businesses creating jobs and opportunities."
The bank lent $8.3b to more than 13,000 businesses and helped 14,000 people get into a home, including lending $1b to first-home buyers, Mentis said.
BNZ grew its loans and advances by 4.7 per cent to $83.1b, with home lending up 6.4 per cent to $39.8b and business lending increasing by 2.7 per cent to $41.5b.
Its deposit book also grew by 6.2 per cent to $58.5b. Lower funding costs helped the bank boost its net interest margin by 9 basis points to 2.27 per cent compared to the prior year.
Chief financial officer Peter MacGillivray said while the Auckland property market had flattened off over the past six months, regional growth was continuing.
He believed the market was sustainable, unlike a few years ago when prices were rising at around 15 per cent.
But BNZ's credit impairments also rose 7 per cent to $76 million and the bank's operating expenses increased 7.3 per cent to $946m, driven by investment in digital and
MacGillivray said while it had increased a little bit year on year it was still low historically and the quality of its book was very sound.
He said the impairments had been spread across most of its asset classes while it had seen an improvement in its dairy lending impairments over the past 12 months.
Mentis also set out the bank's priorities for the year ahead including a focus on lending to the regions by making $10b available to lend to businesses outside Auckland, Wellington and Christchurch over the next five years.
"It's important we support New Zealand businesses wherever they are based," Mentis said.
"With $10 billion available for lending over the next five years, we'll back business owners outside Auckland, Wellington and Christchurch to help create meaningful jobs and opportunities in their towns and communities."
The bank also laid out plans to negate criticism from politicians of the industry for pulling out of the regions by shutting branches.
Mentis said it would maintain its 153 branch network over the next year and was trialling a range of initiatives aimed at finding new ways to deliver personalised banking to more customers across New Zealand, especially in the provinces.
"While we trial these initiatives over the next year, there'll be no changes to our branch
network," she said.
The bank was about to commission its first mobile branch which was expected to be on the road early in 2019.
It is also looking at providing free Wi-Fi hotspots at its more than 500 ATMs.
Mentis moved to front foot the regulator's bank conduct and culture report which is due out on Monday.
She said BNZ had been working closely with the Financial Markets Authority and Reserve Bank of New Zealand to support their review.
"BNZ's already making positive changes as we identify opportunities to improve the way we work and quickly fix issues where they are identified.'
The bank had already removed sales targets for staff in key customer roles in branches and call centres.
She expected the report to take a thematic approach.
"I think there will be thematics that we all need to make sure we look at. We have been proactive looking at all of the inquiries around the world."
But rather than increased regulation being at the forefront of its challenges Mentis pointed back to its customers.
"In the year ahead I think when you look at our customer expectations we need to make sure we are constantly evolving to meet their needs."
She said the bank was looking closely at complaints and working on pain points such as the recent removal of the fee for replacement cards.
"We are really focusing on what is important to customers, how do we innovate with them."
Mentis said the economy was still doing well but it had to work on constraints.
The bank was also keeping a close eye on global geopolitical risks and ensuring it was supporting its business customers through those.
BNZ's parent National Australia Bank had a net profit after tax of A$5.55b, up 5.1 per cent on the prior year.
But its cash earnings of A$5.7b were down 14 per cent as it was hit by restructuring cost and fall-out from the Australian Royal Commission.