Kiwibank's profit takes a hit as interest margin squeezed.Headlines compared to last year.Net profit $174m vs $191mNet interest income $873m vs $858mLending $38.9b vs $35.8bDeposits $32.6b vs $30.3bNet margin - 2.10pc vs 2.25pcBad debt provisions $41m vs $29mState-owned Kiwibank has posted a full-year profit of $174 million, down 9 percent on the $191m recorded a year earlier.The bank is blaming lower net interest margins for the decline, with the margin down 15 basis points on last year.Net interest margin is broadly the difference between what a bank earns on a loan and what it pays for deposits.Retail and business lending growth saw total lending increase to $38.9 billion.Deposits increased $2.4b rising to $32.7b.Provisions for bad debts increased to $41m.Chief executive Steve Jurkovich said despite a challenging economic environment, it was another year of growth with more customers choosing Kiwibank and the bank continuing to grow lending and deposits significantly faster than the market."Regardless of the economy, our focus remains on maintaining momentum through customer and market share growth while helping more Kiwis be better off."The result comes amid talk of mergers in the banking sector.Earlier this month, David McLean, the chairman of Kiwibank's parent Kiwi Group Holdings, floated the idea of Kiwibank merging with fellow New Zealand-owned bank TSB.TSB's owner, Toi Foundation, is already looking at its own merger of TSB Bank with Heartland Bank.Steve Jurkovich declined to comment on the matter today.However, in a statement provided to RNZ, Kiwibank Group Holdings Chair David McLean said:"We believe in building a stronger New Zealand-owned banking alternative for the good of New Zealanders and we consider opportunities that support that. We would have interest in engaging with Toi Foundation and exploring what we could do together but that would be at their discretion and following the outcome of the current process between TSB and Heartland."