Kiwibank's profit has hit a record high after strong home and business lending growth.

The state-owned bank's net profit rose 4 per cent from $126 million to $131m for the year to June 30.

Its net interest income rose from $528m to $630m but operating expenses also jumped, from $422m to $480m.

Chief executive Steve Jurkovich said the improved result was the best in the bank's 20 year history and had been driven by higher revenue and an ongoing focus on costs.

"Today's result and our continued success means $131m of profit stays right here in Aotearoa, allowing us to have even more impact for New Zealand in the year ahead as we deliver on our purpose of Kiwi making Kiwi better off."

Jurkovich said the bank's home lending book grew by $1.8 billion, largely driven by improvements after earlier challenges including a tighter Credit Contracts and Consumer Finance Act.

Other challenges included loan-to-value restrictions, a cooling housing market and rising interest rates.

"Potential buyers are being a lot more circumspect – whether that's first home buyers holding off, existing owners looking to upsize, or property investors taking a wait and see approach," Kiwibank added.

"History shows that different cycles occur, and the market will recover."

Its business banking book grew by $700 million as the bank continued to grow its business lending capability.

Total gross loans and advances rose from $25.28b to $27.75b.

Credit impairment losses turned from a $19m gain in FY2021 to a $16m loss.

Jurkovich said the bank continued to monitor and assess the impact of rising interest rates and inflationary pressure on its customers.

"If you think you need help then don't hesitate to give us a call. The sooner you do so the easier it is for us to work through a solution with you."