Australia’s major banks have reported stable full-year profits for FY25 amid a surge in credit growth and continued investment in digital transformation, according to KPMG’s Australian Major Banks Full Year 2025 Results Analysis.
The majors posted a combined profit after tax of $29.8 billion, down just 0.5% from FY24. Return on average equity (ROE) declined by 500 basis points to 10.7%, reflecting margin pressures and rising operating costs.
David Heathcote (pictured left), KPMG Australia’s head of banking and capital markets, said the results highlight the sector’s resilience.
“FY25 results show that the Majors are navigating economic uncertainty with resilience and strategic focus,” Heathcote said. “Despite a lower cash rate environment, overall the majors have delivered solid growth in lending and deposits, whilst maintaining robust balance sheets.”
The results came after RBA’s November meeting, where the cash rate was held steady following three earlier cuts that spurred lending and investment. The Bank said policy is ‘pretty close to neutral,’ with inflation above target but easing, and recent price pressures seen as temporary.
Total assets rose 5.3% year-on-year, with loan portfolios expanding 5.5%. Business lending was the standout, up 10.5%, while consumer lending grew 4.8%.
According to KPMG, the growth was underpinned by lower interest rates, stable consumer demand, and targeted expansion strategies by the banks.
Net interest income increased 5.9% to $78.8 billion, helping lift total operating income to $93.9 billion. The average net interest margin (NIM) edged up three basis points to 183 basis points, buoyed by higher returns on capital and deposits despite heightened competition.
Westpac notes the RBA now sees capacity pressures “slightly more pronounced” than previously thought. That backdrop, together with Westpac’s more positive outlook for business investment, could support credit demand into 2026 as inflation gradually eases toward target.
Operating expenses climbed 9.7% to $48.3 billion, pushing the average cost-to-income ratio up to 51.8%. Headcount grew 3.3% to meet ongoing transformation goals, with personnel expenses rising 7.8% to $27.4 billion.
Investment spending increased 10.7%, driven by a 10.5% rise in technology costs to $9.9 billion. Banks are fast-tracking digital upgrades and exploring generative AI to enhance efficiency and customer experience.
“Digital transformation will shape operations functions in FY26 and beyond," said Adrian Chevalier (pictured right), KPMG’s consumer and operations partner. "Banks must reimagine their service operations to stay relevant, efficient and resilient.”
With the RBA emphasising the transition to monthly CPI data and acknowledging ongoing capacity pressures, the focus on automation and AI among the Majors aligns with the central bank’s broader outlook for gradual, productivity-driven efficiency gains across the economy.
Expected credit loss (ECL) provisions rose 2.8% to $22.3 billion, broadly in line with portfolio growth. However, the ECL ratio improved to 0.64% of gross loans, down 7 basis points, reflecting solid asset quality and borrower resilience.
Non-performing loans are rising modestly, with stress concentrated in construction and agriculture sectors. Nevertheless, KPMG said overall credit quality remains strong across the majors’ portfolios.
Capital and liquidity remained robust. The average liquidity coverage ratio stood at 134%, down slightly from FY24, while the CET1 ratio averaged 12.1%.
Banks rewarded shareholders with a 2.4% lift in average dividends per share.
Heathcote said banks are focused on efficiency gains to maintain profitability: “The major banks are understandably focused on reducing their cost base to preserve profits in a highly competitive environment, where net interest margins are likely to remain under pressure in the medium term.”
He added that “investment in technology and digitisation is happening at pace, aiming to deliver sustained efficiencies and a differentiated client experience.”
With RBA expected to remain on hold until inflation shows clearer signs of easing, the majors’ steady capital positions and disciplined cost management place them well to navigate a prolonged neutral-rate environment.
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For more information go to our Major Banks Full Year 2025 Results Analysis.
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