ASB bank has announced its ninth record profit in a row - reporting a net profit after tax of $1.275 billion for the year to June 30.
The result was bolstered by a one off gain from the sale of its share of Paymark which netted the bank $46 million.
But excluding that gain the profit was still well up on the $1.18 billion it made in 2018.
Cash net profit at the bank was $1.191 billion - up 4 per cent on the prior year.
Vittoria Shortt, ASB chief executive, said the result was driven by strong across the board performance.
"While all parts of the business contributed to the result, growth in underlying
profit was more subdued this year, reflecting a backdrop of slowing credit growth in the
business and consumer finance sectors."
The bank's loans and advances rose 6 per cent to $88 billion while its deposits also grew 6 per cent to $66 billion.
But it saw a squeeze on its net interest margin which decreased by three basis points to 221 basis points on the prior year.
Shortt said the decline in the margin was predominantly driven by higher funding costs and a preference for fixed term mortgages, partly offset by lower costs relating to customers breaking fixed rate loans.
Its impairment losses on financial assets - the amount its writes off and sets aside for bad debts - also rose by 35 per cent to $108 million.
Shortt said the overall credit quality remained sound and the rise in impairment provisions had been impacted by a change in accounting standards.
ASB's operating income grew five per cent while operating expenses also rose by four per cent. Its cost to income ratio improve 40 basis points to 35.6 per cent over the year.
"We have continued to invest significant resources in ensuring we are safe, sound and secure to help us protect the trust our customers and community have placed in us," Shortt said.
"At the same time, we are continuing to invest in our digital and innovation capabilities to
reengineer processes, enhance our channels and make it easier and simpler for our
customers to bank with us, however they choose to do so."
ASB's investment to prevent financial crimes and increase cyber security contributed to the bank's increase in operating expenses, Shortt said.
"Our long-term financial performance is driven partly by our continued focus on investing in and driving efficiency."
"Our cost efficiency advantage positions us strongly and allows us to be more resilient and remain profitable in the event of an economic downturn."
ASB increased its tier 1 common equity by $500m to $6.4b, or 11.4 per cent of risk-weighted assets, during the year.
The Reserve Bank is proposing to lift the minimum tier 1 common equity ratio from 8.5 per cent current to 16 per cent for the four major banks including ASB after a phase-in period of several years.
RBNZ is scheduled to announce its final decisions on bank capital in November.
ASB parent Commonwealth Bank of Australia reported a net profit after tax of A$8.571b down 8.1 per cent and a cash profit of A$8.492b down 4.7 per cent on the prior year.
-additional reporting Businessdesk.