Westpac New Zealand has reported a nine per cent increase in cash earnings, courtesy of a 39 per cent fall in bad debt charges. Lower impairment charges more than offset contracting net interest margins and flat lending growth in the first half.Westpac stepped back from a mortgage market price war in the first half of the financial year to September, choosing to sacrifice market share to avoid further growing a book more heavily weighted towards low deposit mortgages than those of its rivals.Westpac NZ reported cash earnings of NZ$770 million for the year, up $63 million after a $74 million fall in impairment charges, to $117 million. Westpac NZ's net interest margin fell 34 basis points over the year to 2.38 per cent, but most of that fall was in the first half, as the mortgage market war and a shift to fixed mortgages from more profitable floating mortgages hit most bank margins.Margins have stabilised in the second half. Westpac also reduced its costs, by 3.7 per cent, helping to drive second-half cash earnings up to $400 million, from $370 million in the first half and $361 million in the same half a year ago.Westpac NZ chief executive Peter Clare said lending growth "returned with a vengeance" in the second half, as the bank grew its market share in the market for mortgages with loan-to-value ratios of below 80 per cent.  Westpac reduced its share of high-LVR mortgages through the year as it stepped back from competing in that market segment in the late 2012, ahead of a Reserve Bank of New Zealand speed limit on such lending that came into force on October 1.  Clare said Westpac was now growing share in this sub-80 per cent LVR category, which has helped it stay within the central bank's speed limit. Clare said the overall net interest margin squeeze had eased in the second half of the year, partly because of better margins for term deposits. Westpac increased its term deposits by 11 per cent to $46.6 billion between the second half and the same half a year ago. This increased Westpac's customer deposit-to-loan ratio to 75.6 per cent from 70.7 per cent a year ago, which, it said, was higher than that of its three big rivals.