- The Majors reported a combined profit after tax of $15.5 billion, up 3.5% compared to the first half of 2024, and 4.3% from the second half of FY24.
- Average net interest margin for the Major Banks was 181 basis points, an increase of 2 basis points from 1H24, and a decrease of 1 basis point compared to 2H24 driven by the continued impact of competition.
- The average cost to income ratio of 49.2% increased by 89 basis points from 1H24 and decreased by 9 basis points from 2H24.
- Average provisions as a percentage of Gross Loans and Advances remained relatively steady at 0.65% which is indicative of the strength of the Majors’ portfolio credit quality.
- The average Liquidity Coverage Ratio (LCR) decreased to 133.3%, down by 2% and 1.25% from 1H24 and 2H24 respectively. The average CET1 ratio across the four banks is 12.1%, a decrease of 56 basis points and 27 basis points compared with 1H24 and 2H24 respectively.
- The Majors declared dividends in 1HY25 of $469 million with an increase in the average dividend per share of 2.6% compared to 1H24.
KPMG’s Australian Major Banks Half Year 2025 Results Analysis finds that the Majors reported a combined profit after tax of $15.5 billion, up 3.5% compared to the first half of 2024, and 4.3% from the second half of FY24.
David Heathcote, KPMG Australia’s Head of Banking & Capital Markets, commented: “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 increased by 4.3% and 4.8% respectively compared to 1H24, while both remained broadly flat relative to 2H24 as the Majors benefit from continued growth in their loan portfolios.
Average Net Interest Margin increased by 2 basis points from 1H24 and reduced by 1 basis point compared with 2H24. The Majors all cited persistent competition as a key driver of margin pressure, including other banks acquiring market share. The combined household lending market share of the Majors decreased by 0.64% over the last 12 months, continuing the trend which has seen a decrease in the Majors’ mortgage market share of approximately 5% since mid-2019.
The Majors’ total operating expenses of $22.7 billion have increased by 6.2% compared with 1H24 and 2.9% compared with 2H24. These costs are primarily comprised of personnel and technology expenses.
Over the past 12 months, total headcount has increased by approximately 3.4% compared with 1H24 and by 1.9% compared with 2H24. Inflationary pressure has further contributed to the rise in labour costs, increasing by 6.2% compared with 1H24 and by 3.5% compared with 2H24.
While overall investment spend increased significantly by 11.8% compared with 1H24, it decreased by 8.9% compared with 2H24, as a result of seasonality in spending within the year depending on each of the Majors’ respective investment strategies. Technology expenses have increased by 10.7% compared with 1H24 and by 3.6% compared with 2H24. The Majors cited accelerating digital transformation initiatives in response to customer demand for innovative banking solutions and an increased focus on Generative AI as key drivers.
As a result, the average cost to income ratio increased to 49.2%, an increase of 89 basis points from 1H24, although has decreased by 9 basis points compared to 2H24.
Adrian Chevalier, Consulting Partner, 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.”
The Majors’ expected credit loss (ECL) provisions increased by 2.8% and 1.3% compared to 1H24 and 2H24 respectively, to $22.0 billion. However, ECL as a percentage of gross loans and advances reduced by 3 and 1 basis points from 1H24 and 2H24 respectively, to an average of 0.65%.
Reflecting on the stable credit performance, the Majors cited continued growth in house prices and customer resilience despite the ongoing cost-of-living pressures. Overall stability in credit quality combined with a more optimistic economic outlook also contributed to a continuing reduction in the share of non-performing loans across the Majors’ portfolios.
Capital and liquidity ratios remain well above regulatory minimums, demonstrating balance sheet and liquidity strength. However, the average Liquidity Coverage Ratio (LCR) decreased to 133.3%, down by 2% and 1.25% from 1H24 and 2H24 respectively.
The Majors declared dividends in 1HY25 of $469 million with an increase in the average dividend per share of 2.6% compared to 1H24.
David Heathcote commented: “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.”