Bendigo and Adelaide Bank has more than tripled its first half profit and says business conditions and confidence have improved in recent months.
Bendigo made a net profit of $189.4 million in the six months to December 31, up from $57.9 million in the previous corresponding period.
Cash earnings in the six months to December of $169.7 million were up 4.4 per cent from $162.6 million.
Managing director Mike Hirst said business conditions and sentiment improved during the second quarter of the financial year, but uncertainty remained in the market.
"In particular, we are yet to see more recent rallies in debt and equity markets translate into a material increase in demand for credit," he said in a statement.
Mr Hirst also said demand for loans remained weak and competition among banks for deposits was tough.
The bank's funding costs fell in the six months to December, leading to a 10 basis point rise in its net interest margin to 2.18 per cent.
Net interest margin is a key measure of the profits made on loans.
Deposits make up 80 per cent of Bendigo's funding, and much of the funding cost reduction came from cheaper funds from wholesale markets, it said.
Mr Hirst also said costs had been contained.
Bad debt charges rose in the six months to December to $32.1 million, but they remained low as a percentage of the bank's total assets, the company said.
Bendigo declared a fully-franked interim dividend of 30 cents per share, consistent with the same period in the previous year.