Australia’s mutual banks, building societies, and credit unions experienced increased profitability in 2025, even as rising costs and persistent margin pressure encourage further consolidation within the sector. This is according to KPMG’s latest Mutual Industry Review. Mutual banks operate as member-owned financial institutions, offering banking services similar to traditional banks, but with a focus on community benefit rather than shareholder profit. Building societies and credit unions have similar structures, providing financial services tailored to their members’ needs.
Operating profit before tax rose 14.5 per cent to $844.1 million. This occurred despite a 23 basis point decrease in net interest margins, which landed at 2.28 per cent. Loan growth saw an increase of 8.2 per cent, reaching $145.8 billion, while deposits increased 8.7 per cent to $144.3 billion.
Non-interest income grew by 10.7 per cent. However, the sector’s cost-to-income ratio increased to 78.15 per cent, up from 76.8 per cent the previous year. Capital adequacy improved to 18.31 per cent. KPMG’s Darren Ball noted that mutual banks are facing significant challenges, including heightened regulatory expectations, the necessity for technology investment, and ongoing margin pressure, making it difficult for smaller entities to compete effectively.
Throughout the year, seven mergers were finalised, compared to four in 2024. Survey participants identified profitable and sustainable growth as their primary objective, followed by digital transformation and merger activity. Cybersecurity, funding costs, and competition from major banks were cited as the most significant risks. KPMG emphasised that member engagement and investments in technology, such as automation, web upgrades, and digital authentication, will be crucial for mutuals to manage costs and meet increasing customer expectations.
