Higher expenses and a squeeze on its margins has seen the profit of ANZ New Zealand take a dive in the first half of its financial year.

The country's largest bank reported a net profit after tax of $789 million for the six months to March 31, down 15 per cent from $929m in the six months to March 31, 2019.

ANZ New Zealand's cash profit fell even further, dropping 39 per cent to $677m as it significantly increased its credit provision charges.

It took a $232m credit impairment charge, up from $32m, to reflect the increasing risk from Covid-19.

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The cash profit drop was also magnified as the prior corresponding period included gains from the sale of OnePath Life and its share in Paymark.

Antonia Watson, ANZ New Zealand chief executive, said New Zealand's response to Covid-19 had resulted in extraordinary changes to the economy, the fortunes of businesses and the lives of customers.

"While the Covid-19 crisis only began in earnest in New Zealand at the end of March the collective provision has increased substantially to recognise the possible impacts on economic activity as we go through FY20 [financial year 2020] and beyond."

She said the extent to which this impact continued in the second half would depend on how and when New Zealand fully emerged from lockdown.

"New Zealand has made much better progress in fighting the virus than nearly all countries, and that potentially paves the way to a quicker economic recovery.

"While that's encouraging there will be many challenges as the country emerges from the high level of response and starts to rebuild."

Watson said ANZ had been working closely with the Government and regulators to help business and retail customers manage their finances during a time of severely curtailed economic and business activity.

ANZ had already provided financial help to around 30,000 personal, home and business loan customers through repayment deferrals or adjustments covering lending of around $12 billion.

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"We have helped thousands of businesses to hunker down by using financial strategies such as deferring loan repayments or increasing overdraft facilities in preparation for potentially further impacts in the near future."

Watson said it was early days for the Business Finance Guarantee Scheme, a risk-sharing arrangement for small to medium enterprise lending with the Government.

"It is early days for this scheme as businesses make use of the liquidity provided by the Covid-19 wage subsidy scheme, payment deferrals and temporary facilities before committing to further term lending.

"We're optimistic many businesses will survive, but we know the next few months will be difficult and we're preparing for a higher-than-usual number of loan defaults."

Expenses at the bank were up 13 per cent, largely driven by increased regulatory compliance spend.

Deposits rose 5 per cent while gross lending was up 3 per cent.

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Australian parent ANZ Banking Group made a net profit after tax of A$1.55b for the six months to March 31, down 51 per cent on the March 2019 half year.

The bank said the drop was mainly driven by credit impairment charges of A$1.674b including an impairment charge of A$1.031b related to Covid-19.

Its cash profit was A$1.41b, down 60 per cent from the same prior period.

The ANZ said its board had decided to defer a decision on its interim dividend until there was greater clarity around the economic impact of Covid-19.

ANZ Group chief executive Shayne Elliott said it was a reasonable result given the tough trading conditions being experienced before the crisis hit.

"We maintained our focus on productivity and continued to target balance sheet growth in our preferred segments."

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Elliot said loan losses were at historically low levels and the bank was well positioned to manage higher credit charges taken as a result of Covid-19.

"Covid-19 has clearly impacted our performance, however the work done over many years to simplify our business, strengthen our balance sheet as well as developing a more agile and resilient workforce meant we were well-prepared to support customers through the crisis and I'm confident we will emerge even stronger."

ANZ Group chairman David Gonski said deferring the decision on the dividend was not about the bank's current financial position and it had not received any concerns from the regulator about its level of capital.

"This was a very difficult decision and the board consider all options available as we understand the impact this will have on those shareholders who rely on dividends," he said.

The board would provide an update on its dividend position in August.

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