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Australia’s four major banks have reported a combined profit after tax of $15.5 billion for the first half of 2025, representing a 3.5 per cent increase on the same period in 2024 and a 4.3 per cent rise compared to the second half of FY2023–24, according to KPMG’s Australian Major Banks Half Year 2025 Results Analysis.
David Heathcote, KPMG Australia’s head of banking and capital markets, said: “The first half results reflect a continuation of the majors’ steady 2024 performance. While profits and revenue continue to grow, the results demonstrate the challenge faced by the majors of ongoing competition amongst themselves and other lending institutions together with operating cost pressures.”
Operating income and net interest income were up 4.3 per cent and 4.8 per cent, respectively, compared to the first half of 2024. However, both figures were largely flat compared to the second half of 2024. Growth in loan portfolios supported the increase.
Average net interest margin edged up by two basis points from the first half of 2024 but fell one basis point compared with the second half.
The majors attributed ongoing margin pressure to fierce competition, with other banks gaining market share. Combined household lending market share for the majors dropped by 0.64 per cent over the past year, continuing a broader decline of around 5 per cent since mid-2019.
Operating expenses rose significantly, reaching $22.7 billion – up 6.2 per cent on the previous year and 2.9 per cent on the prior half. These were driven largely by personnel and technology costs.
Staff numbers grew by 3.4 per cent year-on-year and 1.9 per cent from the second half of 2024. Labour costs also rose, climbing 6.2 per cent annually and 3.5 per cent half-on-half, partly due to inflationary pressures.
Investment spending rose 11.8 per cent from the first half of 2024 but declined 8.9 per cent from the second half, reflecting seasonal patterns and varying investment strategies. Technology expenses surged by 10.7 per cent year-on-year and 3.6 per cent half-on-half.
The majors noted strong investment in digital transformation and growing focus on generative AI initiatives.
Consequently, the average cost-to-income ratio rose to 49.2 per cent – an increase of 89 basis points compared to the first half of 2024, although slightly down from the second half.
Adrian Chevalier, consulting partner at KPMG Australia, said: “With technology and digital transformation continuing to attract significant investment across the sector, there is a natural focus emerging on how these efforts contribute to long-term value particularly as institutions navigate rising costs, growing teams and a competitive revenue environment.”
Provisions for expected credit losses rose by 2.8 per cent annually and 1.3 per cent half-on-half, reaching $22.0 billion. However, ECL as a proportion of gross loans and advances fell to an average of 0.65 per cent. The banks reported stable credit quality amid rising house prices and continued borrower resilience, resulting in a decline in non-performing loans.
Capital and liquidity positions remained strong, with ratios well above regulatory minimums. The average liquidity coverage ratio fell slightly to 133.3 per cent, down 2 per cent year-on-year and 1.25 per cent half-on-half.
Dividends declared in the first half of 2025 totalled $469 million, with the average dividend per share increasing by 2.6 per cent compared to the same period last year.
Heathcote said: “While these results demonstrate the continued strength of the majors’ ability to grow their asset bases while maintaining strong credit quality, the impact of continued competition and escalating operating costs are seen in the modest increase in profit over the first half and in turn will put increasing focus on the major’s ability to generate an enhanced return from their investments, including technology spend.”
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