Anyone holding their breath for a house price collapse might be disappointed, BNZ's chief executive says.



The bank has released its latest financial results, which show cash earnings increased $13 million year-on-year in 2016.



But profit fell $125m to $913m.



Lending volumes increased by $5 billion over the year, or 7.6 per cent.

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Chief executive Anthony Healy said he was pleased with the result, and with BNZ having retained its market share of home loans.

CHRIS SKELTON/FAIRFAX NZ Anthony Healy says he is pleased with BNZ's latest financial result.

BNZ recently resumed its relationship with mortgage brokers and added four new groups this year: Mortgage Express, Global Financial Services, Kepa and Mortgage Link.

But Healy said house price affordability was a concern, as metrics such as average income to average price stretched out. "That's a challenge for us as a country and us as a city in Auckland."

But he said he did not expect a dramatic correction in prices. "That would take a spike in unemployment or interest rates and I don't see that happening at the moment. But affordability is an issue and house price inflation has been very strong."

MIKE SCOTT/FAIRFAX NZ BNZ's chief executive says there will likely be fewer branches over time, as more banking is done online.

While migration was strong and there was a lack of supply, the introduction of measures such as the Reserve Bank's recent new loan-to-value rules for investors would only have limited effect, Healy said.

But he said the rules, combined with banks' decision not to include foreign income in the assessment of lending deals for investors, had slowed lending.

He expected inflation to ease and prices to flatten, rather than fall.

Banks were under pressure for funding and were beginning to compete more fiercely for term deposits, he said.

BNZ reported that its average customer deposits increased by $3.7 billion or 8.2 per cent over the year.

Deposit growth has slowed over the past few months, from a rate of 11 per cent year-on-year last year to 8 per cent through May and June of this year.

Healy said that, and the cost of overseas funding, would keep the margin pressure on banks.

He said 90 per cent of customer interactions were now happening through online and digital channels and that was expected to continue to grow.

BNZ was always reviewing its footprint, he said, and over time that could lead to fewer branches as it invested more in its virtual banking channels.

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