Wellington, April 29 NZPA - Australia and New Zealand Banking Group Ltd, the country's largest bank, nearly tripled interim earnings from the preceding six months as bad debt provisions fell and the net interest margin rose.

The bank, which operates both ANZ and National Bank of New Zealand networks, reported an underlying profit of $372 million in the six months to March 31, 2010, up from $134m in the preceding six months but down 25 percent from a year ago.

Profit before tax and credit impairments of $852m, was up slightly from $793m in the preceding six months and down from $990m in the year-ago period.

At a time when commentators are asking if financial pressures in Europe could precipitate a new global financial crisis, ANZ is working on the basis of an ongoing recovery for the New Zealand economy.

"We certainly think the New Zealand economy is stabilised and business conditions are slowly improving," said New Zealand chief executive Jenny Fagg.

Provisions for bad loans of $330m fell 45 percent from the preceding half year but were up 13 percent from the year-ago period.

Ms Fagg said provisions for retail clients improved more than the bank expected and were normalising. Deliquencies in the mortgage portfolio were lower than the industry average. Provisions for rural lending were not returning to normal as quickly.

The net interest margin, a key driver of earnings, rose 5.9 basis points from the preceding half year. A breakdown showed a 10.8 basis point rise in wholesale funding costs and a 7.5 point basis point rise in the cost of funding from deposits. This was offset by a 23.3 basis point improvement in margins in the asset book, mostly achieved care of re-pricing of fixed mortgages as they matured.

The bank has cut 29 fees, saving customers around $55m a year.

The bank's institutional division, which has a 48 percent share of the local debt market, posted a $194m profit, up from $127m in the preceding six months but down from the bumper $240m in the same six months last year.

Ms Fagg said the bank was lending to business and also helping business raise money on debt markets.

"We are really proud of our debt capital markets team," she said.

ANZ continued to support its rural customers through the downturn. Activity in the rural land market had stalled at lower levels as buyers became more cautious.

Ms Fagg argued in a profile by The Dominion Post newspaper that she had encountered anti-Australian sentiment, particularly against big banks, since arriving in New Zealand.

She said last year alone parent ANZ poured $10 billion of funding into its New Zealand business and this was an extraordinary level of support.

"It's the aussie bank's support of the New Zealand bank that has allowed us to keep our AA rating, and if we hadn't kept our AA rating we wouldn't have been able to get funds offshore," she said.

The large provisions for an argument it lost with Inland Revenue over structured finance transactions have washed through previous accounts. The latest accounts show an income tax expense of $150m, up from $61m in the preceding six months but down from $205m in the year ago period.

The company's Melbourne-based parent is Australia's third-largest bank and it wants to become a super regional bank in Asia. The Australian stock market fell today with brokers saying ANZ's first-half dividend fell short of expectations even though it was up 13 percent on last year.