The state-owned bank, which runs current accounts for one-in-four New Zealanders, has turned in record profits off NZ$127 million, but continues to operate at an unsustainable 60% cost-to-income ratio, thanks largely to its reliance on a sizeable network of post office/bank branches.

Commenting on the results, Kiwibank chief executive Paul Brock says: "While we continue to attract more customers, the way they interact with us is rapidly changing with around 89% of all our service transactions already being completed via digital channels. Changing customer needs means that the focus for the future lies in continuing to innovate to transform the group into a digital business resulting in digitally-enabled sales supported by our people."

The bank is currently one year in to a four-year $100 million core transformation programme, ripping out a a 12-year old Unisys-based system from Australian firm Ultradata in favour of a new platform from SAP.

Over the course of the year, the bank has also assumed management of the company owned branch network from New Zealand Post.

Brock says: "Significant work has been undertaken on a three year transformation and optimisation programme with a focus on customer experience within the branch environment".

He says the branch transformation aims to enable the bank to team up with more local businesses in communities to manage services on its behalf: "The branch changes are designed to ensure our services and reach into communities is retained whilst acknowledging the changing way in which customers are interacting with us."