The latest report from a New Zealand-operated and Australian-owned bank prompted the Greens to call for the Government to strengthen Kiwibank.
Westpac NZ chief executive Peter Clare said the profit was a strong all-round performance in a highly competitive environment.
''The result was driven by a modest increase in revenue, disciplined expense management and a focus on improving asset quality and balance sheet strength.''
The improvement in asset quality was a highlight of the year, reflecting a targeted approach to lending and the ongoing lift in the New Zealand economy.
Overall lending increased 4% over the year, with strong growth of 7% recorded in drawn and undrawn mortgages with a loan-to-value ratio below 80%. Business lending rose while stressed assets reduced.
Deposits grew 11%, which more than fully funded loan growth for the year and led to an industry-leading deposit-to-loan ratio rising nearly 5% to 76%.
Funds under management and administration in the wealth business grew strongly, up 21% to $5.8 billion, with more than $2 billion in KiwiSaver investments.
Mr Clare said the bank continued to invest in simplifying its business and making banking easier and faster for customers.
Greens co-leader Russel Norman said Westpac's profit marked the end of another record profit season for the ''big four'' Australian banks, which monopolised New Zealand's banking sector.
Overall, ASB, ANZ, BNZ and Westpac made $3.7 billion in cash profits in the past financial year, up 10.1% from last year's record result.
''Our big four Australian banks are already some of the most profitable banks in the developed world. This year they got even more profitable. While it's good to have strong banks, the excessive profits of the four foreign-owned banks are simply damaging the rest of the New Zealand economy and contributing to our No1 problem - a high and persistent current account deficit.''
Competition could be increased by strengthening Kiwibank and other New Zealand-owned banks, he said.
By injecting capital into KiwiBank and allowing it, in time, to become the Government's banker, its capacity could be increased to compete fairly with the much larger Australian banks.
The banking system was the lifeblood of the New Zealand economy. It was important to have it so all businesses could prosper, not just the foreign-owned banks, Dr Norman said.
Westpac New Zealand's parent, Australian-listed Westpac, produced an ''impressive'' cash profit of $A7.1 billion ($NZ8.15 billion), an 8% increase on the pcp, Morningstar analyst David Ellis said.
The bank continued to benefit from moderate revenue growth (up 4%), good cost control (expenses up 4%) and a sharp improvement in bad debts (down 30%), resulting in earnings per share rising 6% and a 5% increase in the tax-paid dividend to $A1.74 a share.
Solid lending growth was sourced primarily from Australian housing loans, with increasing numbers of customers taking advantage of low interest rates and repaying home loans faster than planned, he said.
Standouts were the increase in rate of returns (ROE) to 16% and a second fullyfranked A10c per share special dividend, confirming Morningstar's view the major banks continued to generate surplus capital.
''Importantly, Westpac will neutralise the ordinary and special dividend through a market buy-back.''
All business contributed to the strong result, with St George, up 17%, New Zealand, up 16%, and wealth management, up 13%, being the strong performers, Mr Ellis said.
''We are impressed with the strong year-on-year results but second-half performance slowed compared to the first half.''
Net interest margins suffered and productivity was not as good as in the first half.
Despite the softer second half, Mr Ellis remained confident in the earnings outlook supported by a strong balance sheet, capital levels exceeding the internal target range and customer deposit growth far exceeding loan growth.
''The continued improvement in asset quality bodes well for future earnings growth.''
