Wellington, Feb 19 NZPA - Kiwibank has declared a 9 percent drop in half year profit to $23.5 million.

The reduced profit, for the six months to the end of 2009, from $25.8m for the same period in 2008 was "a strong performance in a very difficult financial environment," said Kiwibank chief executive Sam Knowles.

In the period total lending increased 15 percent from $8.5 billion to $9.8b and retail deposits increased 3 percent from $6.7b to $6.9b.

The bank has increased provisions for bad debts from $12.2m to $15.4m.

The bank successfully raised $309 million through a bond issue in Australia as Mr Knowles said it looked to widen its funding base for domestic residential lending.