Australia and New Zealand Banking Group has delivered a record first-half cash profit on the back of strong growth in its home lending and institutional businesses, but warned of challenges in the coming months.

The lender posted a 23 per cent jump in cash profit to $3.82 billion, largely in line with analyst expectations.

Statutory net profit for the six months to March 31 was marginally lower at $3.55 billion, while operating income rose six per cent to $10.14b.

Chief executive Shayne Elliott said the result was driven by solid revenue growth across the board but warned of a difficult next six months because of intense competition and the impact of rising rates on households.

“Competition in retail banking is as intense as it has ever been, both in Australia and New Zealand,” he said in a statement on Friday.

“We understand that sustained higher inflation and interest rates create further challenges for some households and businesses across the economy.”

The lender’s net interest margin – a key measure of its profitability – rose seven basis points from the preceding six months to 1.75 per cent amid a rising rate environment but came in slightly below market expectations.

ANZ’s institutional division was the strongest performer, posting a 35 per cent jump in revenue and doubling its contribution to the profit.

The unit benefited from higher volumes of payments processing and servicing of other financial institutions.

The commercial division also lifted revenue by 30 per cent while the New Zealand unit saw revenue going up 14 per cent along with margin expansion.

Revenue at its retail division was up 11 per cent from a year ago, largely on the back of strong home loan volumes.

But with the mortgage market continuing to be highly competitive, this likely came at the cost of lower margins.

Impaired loans were down 16 per cent however, the bank increased its provisions in light of the increasing economic challenges ahead.

ANZ will pay a fully franked interim dividend of 81 cents per share, compared with 74 cents for the same period a year earlier.

– AAP