Bendigo and Adelaide Bank has lifted its first half cash profit almost 10 per cent after lower funding costs helped improve its margins.

The bank made a cash profit of $185.9 million for the six months, up from $169.7 million a year ago.

But net profit fell almost nine per cent to $180.7 million, as a result of one-off charges.

Chief executive Mike Hirst said lower funding costs helped lift the bank’s margins over the half year.

“Deposits are at pleasing levels and wholesale markets are working well,” he said.

“We have a lot of flexibility in how we fund our business and this is reflected in our increased margin.”

But Hirst said the company continued to face weak growth conditions.

“We’re seeing low growth due to subdued demand and an increase in people making additional efforts to pay down their debt,” he said.

“This is most evident in our mortgage and our Rural Bank portfolios.”

Hirst said he expected conditions to be roughly the same in the second half.

The bank announced a fully-franked interim dividend of 31 cents per share, up one cent from a year ago.