ANZ's Australian division increased its share in mortgages and deposits, improved its net interest margin and slashed its bad debt charge. The result was a 42 per cent increase in underlying profit for the year to September 30, or 11 per cent before provisions.Activity slowed in the second half however, with profit before provisions up only four per cent, but this only took a little of the gloss off a very strong performance for the bank's biggest division.Growth in market share was a strong feature of the result. Lending growth of 12 per cent was driven primarily by 1.4 times system's growth in mortgages, while household customer deposits grew 11 per cent, or about 1.2 times system. Commercial lending was up eight per cent. Commercial deposits fell one per cent.Fee income was affected by the exception fees changes that took place in the March half. Income from Australian and New Zealand operations was down $180 million as a result. The division's net interest margin rose from 2.53 to 2.60 per cent over the year.ANZ chief financial officer Peter Marriott said: "The pattern with the net interest margin is similar to what we've seen in previous halves, where there is a drag coming from higher funding costs, and particularly the wholesale raisings. "But increasingly the driver is actually the hard deposit costs, and you can see that was particularly true in the second half, where the funding cost impact was only about 2.6 basis points, but deposit competition was negative 5.9 basis points."We've been able to reprice, but nonetheless, our margins, whilst up in the second half, were down in Australia, particularly retail Australia. They were up in institutional and up in New Zealand, so overall they were up."