The ANZ New Zealand branch's disclosure statement, which includes all the bank's activities in this country, showed net profit rose 9.8% to $257 million for the three months ended June 30, down from the 18.5% growth to $735 million shown for the nine months ended June.

The slowdown reflected a slowing in net interest income growth of 1.9% to $649 million for the three months compared with the 4.8% growth shown for the nine months.

That was offset by charges against profit for bad loans falling to $47 million for the quarter and $132 million for the nine months compared with $83 million and $408 million respectively for the same periods a year earlier.

ANZ New Zealand chief executive David Hisco says ANZ's underlying profit for the nine months ended June was up 45% to $916 million which he says reflects "sound cost management and a significant reduction in provisioning for credit impairment."

The latter is due to the improving New Zealand economy and the rural sector's credit quality improving as a result of the benefits of strong commodity prices, Hisco says.

The three different measures of ANZ's mortgage book showed it either shrank $54 million to $53.98 billion in the June quarter, shrank $151 million to $53.49 billion or grew $275 million to $57.19 billion. However, that last figure included both on-balance sheet loans and $5.86 billion of off-balance sheet loans, generally loans approved but not drawn down.

By and large, although ANZ still has New Zealand's biggest mortgage book, it has been losing market share since its 2003 takeover of National Bank.

ANZ's figures aren't directly comparable to those of the other three major banks and Kiwibank because they are prepared using the Basel l rules while the other banks follow the Basel ll rules which result in significant differences.

Hisco says both retail customers and businesses are focusing on strengthening their balance sheets rather than investment.

The Canterbury earthquakes aren't having as bad an effect on credit quality as the bank had expected, he says.

"Nationally, we have seen customers moving from fixed to variable rate mortgages. As at mid July 2011, 40% of our home lending book was fixed compared to 58% at September 2010 with 25% of new lending flows being fixed."