The Bank of New Zealand withstood tough local trading conditions and a fragile global economy to report a 16.8 per cent increase in its cash earnings to $612 million in the September 2010/11 year .
The National Australia Bank-owned BNZ said the result was built on solid revenue and deposit growth, and on cost control.
BNZ's performance reflected improved revenue through volume growth in variable rate housing products, repricing of the business lending portfolio to reflect current market conditions, and a lower bad and doubtful debts charge. Mortgage lending volumes increased with market share higher at 16.2 per cent.
The charge for bad and doubtful debts fell by 19.3 per cent to $151m.
The bank said it had grown retail deposits to $31.1 billion, an increase of $2.8b or 9.9 per cent.
Market share in deposits has also grown from 17.7 per cent in September 2010 to 18.2 per cent.
Chief executive Andrew Thorburn said the bank would continue to strengthen its balance sheet in today's volatile global environment.
BNZ's capital levels were above the regulatory minimums and have been further strengthened from the prior year, he said.
Revenue for the year was $1.78b, up from $1.68b in the previous year.
Lending growth for the bank remained modest due to the subdued housing market and weak overall demand for business credit.
But BNZ said it had grown lending market share in key segments over the past year. In total, BNZ's share of business lending increased from 25.8 per cent to 26.5 per cent.
Thorburn said customers were continuing to pay off debt.
"While deleveraging is still a trend, we're seeing real strength in some corporate balance sheets, and well structured companies are taking advantage of sustained demand for New Zealand commodities,'' he said.
Bad and doubtful debt charges fell by $36m to $151m.
"While we're seeing a local economy that's struggling to gain growth momentum, we remain optimistic about the long term economic outlook with favourable stimulus to come from the eventual Christchurch rebuild, solid export volumes and continued global demand for our commodities,'' he said.
Thorburn told a news conference that lending growth was subdued over the year.
"Borrowing has been somewhat cautious, with businesses wanting to repay debt and get themselves into a strong cashflow position,' he said.
"I think a little more confidence is warranted, because balance sheets are in pretty good shape,'' he said.
Similarly, households had been more prudent and disciplined, with people saving more.
The year had seen a continuation of the trend away from fixed rates to floating rates _ with about 60 per cent of BNZ's mortgage book now on floating rates.
The Reserve Bank, at today's review of the official cash rate, kept the rate at 2.5 per cent but Thorburn said he expected rates to rise, based on an increased cost of funding.
Looking ahead, Europe's sovereign debt problems would pose big questions for the global economy.
"Europe will have a significant impact around the world and definitely on us,'' he said.
But domestically he said there was reason for confidence in the country's ability to trade its way through.
Meanwhile parent company National Australia Bank said its group cash earnings increased by 19.2 per cent to A$5.5 billion.
NAB said the improvement was driven by revenue momentum in business banking and personal banking in Australia and an improved performance from specialised group assets.
