Wellington, May 5 NZPA - Australian bank Westpac said it invested in its New Zealand business during the downturn and is now getting growth across the business.

The bank today reported a $125 million profit in New Zealand in the six months to March 31, down 38 percent from $202m in the same period last year, but up from $34m in the previous six months. The result does not include the institutional business.

The parent reported a 30 percent rise in interim earnings to $A2.98 billion ($NZ3.66 billion).

Westpac New Zealand chief executive George Frazis said the New Zealand result was pleasing as the bank had good growth momentum across all of its businesses.

"We've been absolutely open for business during the downturn. The bank has continued to invest in its business," he said, citing the employment of 130 frontline bankers, training of staff and the opening of new community branches as part of a locally focused strategy.

"There is no doubt there is a turnaround in the economy," he said. Though, the next 12 months would still be challenging.

Impairment charges peaked in the second half of 2009 and were now easing. There were no new large impairment charges in the latest period. The bank was still very conservatively provisioned, he said.

Non-interest income fell 21 percent due to reductions in fees.

The bank increased business lending when the total market contracted. It experienced 6 percent growth in mortgage lending. Lending growth was offset by higher funding costs and the previously announced decision to reduce bank fees.

Deposits rose 7 percent and term deposits rose 21 percent.

The parent wrote back $A109m of a provision for the structured finance tax case in New Zealand after settling with Inland Revenue at 80 percent of the disputed amount.

Westpac is adopting a new operating model in this country by the end of 2011 after it became apparent in 2008 that it had been non-compliant with conditions of registration.

There will be a transfer of assets and liabilities from the New Zealand branch to Westpac New Zealand Ltd, which will assume most of the lending and deposit-taking activities currently conducted by the New Zealand branch.

The branch will continue to provide full financial markets functionality to its customers.