The Bank of New Zealand has turned in a strong full-year profit, but its Australian parent has been dented by bad debts and struggling United Kingdom operations.

BNZ's profit leapt 21 per cent to $741 million in the full year to September. Parent company National Australia Bank (NAB)'s profit fell by the same percentage margin to A$4.1 billion (NZ$5.2b).

In New Zealand, the bank was able to shave 2.1 per cent off its operating expenses while boosting revenue 6 per cent, to $1.88b.

The bank's net interest margin - the premium added to the cost of borrowing money before it is loaned out- rose 9 basis points to 2.39 per cent over the year. BNZ's drive for local deposits helped maintain the margin the bank is enjoying by reducing the reliance on more expensive offshore funding markets. Retail deposits rose more than 10 per cent to $34.5b, with the bank's market share of deposits increasing to 18.8 per cent.

The cost of bad and doubtful debts on the bank's books fell significantly, from $151m in the last financial year to $98m.

The results show BNZ's share of the hotly contested mortgage market has remained almost flat from last September to August this year, at just over 16 per cent.

It's agribusiness share rose from 20.8 per cent to 21.9 per cent, and the bank said the sector continued to be well supported by ongoing demand for protein in emerging markets.

BNZ chief executive Andrew Thorburn said in a statement that the strong profit was not just a result of prudent cost management and the focus on local funding.

"It's the strength of our bank which allows BNZ to continue to give confidence to our depositors and rating agencies which in turn supports our balance sheet strength and funding capability."

BNZ's massive return comes a week after the country's largest bank, ANZ, reported a record full-year profit of $1.27 billion, up 17 per cent. That followed ASB's full-year profit of $658m reported earlier in the year, up by 11 per cent. The big four banks regularly cop criticism from groups concerned that much of their huge profits goes overseas to Australian shareholders.

Thorburn said BNZ employed more than 5,000 New Zealanders, paid over $700m in salaries and to local suppliers, and more than $200m in taxes. He also pointed out that it was the first carbon-neutral bank in New Zealand, and the largest Fair Trade business in the country.

While BNZ will have a healthy dividend to pay to its Aussie shareholder, the NAB group's profit decreased for the first time since 2009. NAB chief executive Cameron Clyne said the Australian and New Zealand businesses had performed well, but that was overshadowed by the challenges in the UK.

Prolonged economic weakness in Europe saw bad business lending debts increase significantly, and the UK business is also in the middle of a restructuring. NAB shares were trading at A$25.88 before the market open, and have risen 10.8 per cent in the year to date.

- © Fairfax NZ News