Westpac New Zealand’s net profit after tax rose by 13% over the past year, as it received more interest from borrowers relative to that it paid savers.

The New Zealand branch of the Australian-owned bank reported a net profit after tax of $1.20 billion in the year to September – an increase from $1.06b the prior year.

The result came as its net interest income rose by 9% and its net interest margin rose by 15 basis points to 2.32%.

The bank noted it made more money from its mortgage book. It also increased its home lending by 5% and its business lending by 2%.

On the other side of the ledger, it profited from its customers shifting their money from term deposits to lower cost transaction and savings accounts.

The value of term deposits held by the bank fell by 2%, while transaction and savings deposits rose by 2% and 8% respectively.

The other factor that supported the bank’s profit growth was a $71 million positive swing in impairment provisions, as customers coped better than expected with the tough economic conditions.

Westpac New Zealand chief executive Catherine McGrath said, “Our data shows a higher proportion of home loan customers are at least three months ahead on their home loan repayments than six months ago, following nearly three years of decline”.

“The average customer is nearly 11 months ahead on repayments, with an average ‘buffer’ of almost $12,000. Housing arrears and the number of customers being supported by Westpac’s Financial Hardship team are also down on the 2024 financial year.

“We think all this will add up to increasing consumer and business confidence and therefore higher spending to stimulate economic activity as we head into 2026.”

McGrath explained how the Reserve Bank lowering the Official Cash Rate (OCR) had eased costs for borrowers.

“In the last week of October, our customers were rolling off an average fixed home loan rate 5.95% per annum,” she said.

“A customer with a $300,000 loan on a 15-year term rolling off that rate on to our current one-year special of 4.49% per annum would have an extra $230 a month in their back pocket.”

The effects of a lower OCR are continuing to make their way through the economy, with Westpac saying that around 40% of fixed rate home loans will be repriced in the next six months.

Westpac economists forecast economic growth of 1.2% for 2025, rising to 3.0% in 2026 and 3.4% in 2027, as the full effects of rate reductions flow through to households and businesses.

Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.