Kiwibank profits are up almost 23 per cent to $97.1 million for the June year, accounting for the lion's share of parent company NZ Post's profits.
Kiwibank increased loans and advances by more than 6 per cent to $13.2 billion, during the June year.
Kiwibank has a young customer base and it planned to keep targeting first-home buyers wanting to borrow for a home.
"We have been pretty active in making sure they are up the top of the queue," Kiwibank chief executive Paul Brock said, despite Reserve Bank plans to restrict the level of low deposit loans.
Starting from October 1, banks will be forced to limit mortgages with loan-to-value ratios (LVRs) of over 80 per cent to no more than 10 per cent of their new lending.
Kiwibank had seen "significant" growth in lending with a loan to value ratio under 80 per cent in the past year.
Brock said the key thing was not to focus on the 10 per cent they could lend to people with low deposits, but on total lending.
"How fast you grow in the sub 80 per cent LVR helps you grow from a dollar point of view in the percentages above that. So if we grow the total pie, we can do more lending in the greater than 80 per cent [category] and support first home buyers," he said.
In the June year, Kiwibank customer deposits grew more than 4 per cent to $12.1 billion.
After 11 years in business, Kiwibank now has 850,000 customers, up from about 800,000 a year ago. Kiwibank now has about 10 per cent of all bank customers.
Brock said there had been a continued strong recovery from the impact of the global financial crisis and the Christchurch earthquakes.
While Kiwibank's lending had increased in the past year, many New Zealanders were repaying debt, which was positive, but made growth more challenging for banks.
The lending growth showed many customers were switching to Kiwibank from other banks.
The bank's bad debt provisions fell significantly in the past year.
Total provisions for impairment losses stood at $72m at the end of june, compared with $91m a year earlier. Brock said this reflected a stronger property market which meant bad debts could be cleared, as well as more active management of problem loans.
Customer deposits accounted for 84 per cent of all bank funding, Kiwibank said.
Kiwibank is also moving into the small to medium sized business banking market and its Kiwi Insurance arm had "another excellent year".
In the small business market, Kiwibank has grown its customer base by more than 8 per cent in the past year to more than 34,500 customers, in what it called a "flat market" at best.
Kiwibank lending was now growing faster than before the Canterbury quake, with consumer lending demand clearly re-emerging, Kiwibank said.
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