ANZ Bank New Zealand – the country’s biggest bank – said its cash profit rose by 1 per cent in the six months to March to a “large” $1.1 billion.

The bank’s statutory net profit fell by 17 per cent to $1.0 billion.

Its credit impairment charge came to $121 million, up $62 million.

Customer deposits and net loans and advances were broadly flat.

Chief executive Antonia Watson said it was a good result, with all parts of the business performing well, but she added the bank was preparing for an uncertain economic environment.

“The New Zealand economy has remained remarkably resilient, however the impact of a softening housing market, stubbornly high inflation and the impact of a rising official cash rate is starting to have a material impact on businesses and households,” she said.

“While a rising interest rate environment contributed to the result, this was offset by intense competition in home lending, which we expect to remain a feature of the market for some time into the future.”

Watson acknowledged that a $1.1 billion profit was “a large number” but said it needed to be put into the context of the size of ANZ’s business and the role banks like ANZ play in supporting economic activity in New Zealand.

“The actual profitability of ANZ NZ, which measures our returns versus the amount of capital committed by shareholders, is middle of the pack when compared to large companies listed on the New Zealand stock exchange,” Watson said.

Watson also acknowledged the difficult circumstances facing New Zealanders nationwide with many dealing with a rising cost of living and recent natural disasters that have devastated large parts of the country.

“With the flooding in Auckland in January and Cyclone Gabrielle in February, this has been a tough six months for many New Zealanders,” she said.

“As the country’s largest bank, we are acutely aware of the role we play in supporting customers through tough times and have a team dedicated to working directly with impacted customers and communities.”

Watson said many customers took the opportunity to pay down debt while interest rates were low, and that a third are ahead on their home loans by six months or more.

Customers were also benefiting from term deposit rates being around five times higher for popular terms than they were before rates began rising.

Watson said that from talking to business customers across the country, confidence remained very subdued.

“Given the ongoing uncertain environment, we need to remain cautious, which is reflected in the increase in credit provisions.”

Total credit impairment provisions increased to $860m.

The Reserve Bank, in its financial stability statement this week, said New Zealand households were facing increased debt servicing costs as their borrowing reprices to higher interest rates.

“To date there have been limited signs of distress in banks’ lending portfolios,” the Reserve Bank said.

“This reflects the ongoing strength of the labour market and that borrowers have been able to adjust their spending or use previous savings and repayment buffers. However, cash-flow pressures in households are growing and buffers are likely to be tested,” it said.

The Reserve Bank said a large rise in unemployment remains the biggest risk to domestic financial stability at present.

Nationally, house prices are down 16 percent from their peak, with larger falls in Auckland and Wellington.

Negative equity is still at relatively low levels, the Reserve Bank said.