Westpac New Zealand reaped the benefit of better margins on higher income in the six months ended March, the bank said yesterday.
The bank reported cash earnings, the equivalent of an after-tax profit, of $333 million for the period, up 24% on the $269 million reported in the previous corresponding period.
Expenses dropped to 42.7% (44% in the pcp) of the bank's $976 million of operating income, which was up 7% on the first half last year.
Chief executive Peter Clare, announcing his first results, said the New Zealand operating model, ongoing investment in the business and simplifying processes for customers continued to be a winning strategy.
"Having local bankers in local communities being able to make fast and effective decisions is clearly striking a chord with customers."
Deposit growth had fully funded lending, margins remained well managed and asset quality continued to improve, he said.
In the period, deposits increased 4%, or $1.4 billion, driven by a 6% increase in transaction and savings deposits. That lifted Westpac New Zealand's deposit-to-loan ratio to 68%.
Lending increased 1% to $58.2 billion, reflecting the subdued credit environment, Mr Clare said. Home lending outperformed the market, increasing 1%, while business lending and other personal lending were relatively constant.
Westpac had 20% of New Zealand's consumer lending market in the first half, unchanged from a year earlier, while its share of deposits edged up one percentage point to 21%. Its share of business lending slipped to 17% from 18%, the bank said.
Net profit at the parent dropped 25% to $A2.97 billion ($NZ3.79 billion), meeting analyst estimates. In the first half of last year it recognised a tax gain from the acquisition of St George Bank. The bank's effective tax rate was 30.7%, compared to 5.6% in the first half of 2011.
In Australia, the Commonwealth Bank of Australia cut its interest rates yesterday, following a cut by rival National Australia Bank on Wednesday.
CBA owns New Zealand's ASB and NAB owns the Bank of New Zealand.
NAB cut its variable home loan rates by 0.32%, also less than the Reserve Bank of Australia's 0.5% cut made on Tuesday.
However, NAB also cut the interest rate for its online savings account iSaver by 0.5%.
Westpac is keeping tight-lipped on any interest rate cuts despite posting a near $A3 billion net profit for the first half of its financial year.
ANZ, the owner of ANZ-National Bank in New Zealand, is due to decide on its lending rates on May 11.
The RBA's cash rate now stands at 3.75% and the New Zealand cash rate remains at its record low 2.5%.
