KPMG Australia sees bank profits dip as costs and pressure rise

Australia’s biggest banks are still profitable, but the work around them is getting harder. KPMG Australia’s half-year review of Commonwealth Bank of Australia, Westpac, National Australia Bank and ANZ showed combined profit after tax of A$15.2 billion, down 2.1 percent from the prior half, as rising costs and tougher competition put pressure on returns.

The numbers point to a sector that is holding up, not accelerating. Average net interest margin stayed relatively stable at 178 basis points, but the average cost-to-income ratio climbed to 52.1 percent, up 4.6 percent from 1H25. Average return on equity fell 54 basis points to 10.7 percent, while provisions remained low at 0.6 percent of gross loans and advances and the average common equity tier 1 ratio rose to 12.1 percent. In other words, the majors are still well capitalised and still generating cash, but they are doing it with less room to absorb cost growth.

For KPMG staff, that mix matters. Audit teams reviewing bank balance sheets and risk disclosures will face another cycle of close attention on credit quality, capital adequacy and how management explains the squeeze between flat margins and rising expenses. Advisory teams are likely to see more demand for cost transformation, treasury work, digital modernisation and balance-sheet optimisation as bank executives push for productivity gains. For consultants and risk specialists, the pressure point is clear: resilience at the client level does not automatically mean easier engagements. It often means more scrutiny, tighter deadlines and more expectations on every line of the deliverable.

The latest half-year result also sits in a broader pattern KPMG has been tracking. Its full-year FY25 analysis found the four major banks posted combined profit after tax of A$29.8 billion, broadly flat year on year, with an average net interest margin of 183 basis points. The latest half-year margin suggests some easing from that full-year level, even as profits remain strong enough to keep the majors among the country’s most dependable earners.

That resilience is part of why the sector keeps drawing attention from regulators and advisers alike. The Reserve Bank of Australia has described the banking system as resilient, well-capitalised and profitable, while the Australian Prudential Regulation Authority continues to track profitability, margins, non-performing assets and capital ratios closely. For KPMG’s financial-services teams, the message is not that bank work is drying up. It is that the work is becoming more about proving strength under pressure, and that usually means more demand for technical judgment, more challenge from clients and less room for error.