Westpac New Zealand's first half profit is up 4 percent on the year earlier, though bad debts are on the rise.

The bank made a net profit of $545 million for the six months ended March, and while that was up on the year earlier it was down 19 percent on the six months earlier, ended in September.

Westpac's bottom line included a provision of $37m for bad debts, compared with $33m the year earlier.

Chief executive Catherine McGrath said conditions were set to get worse with Westpac economists expecting the economy to shrink by 0.4 percent in the June quarter, with unemployment to peak at 5.6 percent and inflation to reach 4.5 percent.

Key numbers for the six months ended March compared with a year ago:

Net profit $545m vs $525m

Net operating income $1.56b vs $1.5b

Expenses $760m vs $734m

Net interest margin 2.29% vs 2.26%

Net impairment charge $37m vs $33m

McGrath said total lending rose 6 percent and deposits by 3 percent over the year earlier, despite strong competition.

"We've grown faster than…