Bendigo and Adelaide Bank has lifted its cash profit almost 10 per cent as lower funding costs offset the impact of weak lending growth.
Australia's largest regional lender made a cash profit of $185.9 million in the six months to December 31, up from $169.7 million in the same period a year earlier.
Chief executive Mike Hirst said the bank was facing a low growth environment that was likely to continue this year.
"We're seeing low growth due to subdued demand and an increase in people making additional efforts to pay down their debt," he said.
However, he said lower funding costs had helped lift the bank's margins during the half, which was a key driver of the growth in underlying earnings.
"Deposits are at pleasing levels and wholesale markets are working well," he said.
"We have a lot of flexibility in how we fund our business and this is reflected in our increased margin."
Bendigo's deposits grew by $500 million in the six months to December to $42.7 billion.
But Mr Hirst said increasing competition for fixed rate home loans could hurt Bendigo's margins.
"The margins we lock in with those fixed rates are marginally lower than we generate with out fixed mortgages," he said.
"So the more that mix swings to those ... that will potentially have a negative impact," he said.
The bank's shares gained six cents to $11.78.
