Strong home and business loan growth helped to boost profits at the Bank of New Zealand to $550 million for the six months to March 31.
The bank's bottom line was up 12.2 per cent on the same prior period and was bolstered by the sale of Paymark in which the BNZ had a 25 per cent share, although unfavourable market to market movements on offshore debt instruments weighed it down.
The New Zealand arm of the National Australia Bank reported cash earnings of $532m - up 7.7 per cent while its net operating income increased 5.5 per cent to $1.258 billion.
Angie Mentis, chief executive of the BNZ, said she was really pleased with the bank's performance which continued to be strong.
Mentis said the bank had lent money to 7500 Kiwis to buy property of which 2500 were first home buyers while also lending money to 8800 small and medium-sized business owners to start or grow their businesses.
The bank's home lending book grew 5.3 per cent to $41.3b while its market share increase from 15.6 per cent to 15.9 per cent.
"Our housing loan growth was particularly pleasing as we know homeownership plays a key role in New Zealanders' sense of on-going financial wellbeing and people are looking to BNZ to help take this important," Mentis said.
Chief financial officer Peter MacGillivray said while the Auckland market was down 2 per cent the rest of the country was up 8 per cent.
"We are relatively comfortably in the spread across the country we have got," he said.
MacGillivray said with the current interest rates remaining low and the capital gains tax now off the agenda it believed the current level of growth would continue at a similar rate.
Mentis said health checks with its customers showed debt consolidation was still top of mind for many alongside getting into a first home or investment property and planning for their retirement.
She said the appetite in the housing market remained strong and had not come off yet.
Asked if already low mortgage rates were likely to fall further MacGillivray said: "That is the million dollar question."
Economists are picking either one or two cuts in the official cash rate this year but MacGillivray said given the employment statistics remained strong that may not happen.
But Mentis said its customers were taking advantage of the low-interest rate environment with around 6000 cutting an average 4.7 years off their home loan terms by paying more than the minimum off.
Total gross loans and acceptances rose by 6.4 per cent to $84.9b while deposits increased by 2.6 per cent to $59.7b
But credit impairment charges also ticked up by $3m to $44m.
MacGillivray said the quality of its loan book had never been better and the charges remained low historically.
"We are not really seeing too much stress across any of our key segments."
However, it was keeping an eye on construction lending.
Operating expenses also rose at the bank by 2.2 per cent to $475m. MacGillivray said wage inflation was a factor as was its ongoing investment in digital technology.
Mentis said compliance and risk had also added costs to the bank.
The banks have come under increased regulatory pressure in the last year in the wake of Australia's Royal Commission into misconduct in the finance sector and New Zealand regulator's own conduct and culture review.
The banks are also facing pressure from proposals from the Reserve Bank to increase capital significantly.
Mentis said it was working on its submission and was "absolutely supportive" of the RBNZ's intent in terms of ensuring financial stability in the sector.
"We think it is an important discussion to have," she said.
But it would also have an impact on customers. The RBNZ has said the change could add 25 to 40 basis points to mortgage interest rates and MacGillivray said it believed it would be more at the higher end of that and could be more depending on how the consultation went.
The proposals have spurred talk that the banks will consider spinning out the New Zealand arms into separately listed NZX companies as a way to raise more capital.
But Mentis ruled that out. "No, that's not our plan. We just have to make sure we get the result in the right way. There are considerations around our deployment of capital."
Mentis said its strategy was to be very focused around consumer and SME lending and that would continue.
BNZ's parent NAB cut its dividend for the half to 83c a share, down from 99c a share a year ago.
Its cash profit was up 7.1 per cent to A$2.954b but was down 0.3 per cent after a A$325m remediation expense and after restructuring costs were taken into account.