The major banks reported a combined cash profit after tax of $28.5 billion, a 7.2 per cent increase from FY21 despite inflation and rising interest rates creating pressure on consumers.

According to the KPMG Major Australian Banks Full Year Analysis Report 2022, the Australian economy has continued to recover from the COVID-19 pandemic, and the impacts of the RBA’s recent interest rate rises have not yet caused any material slowdown in business and consumer activity.

This comes after a long period of low interest rates, which have created prolonged pressure on the major banks’ margins, which are now beginning to rise.

There is a more challenging outlook for the major banks, however, with inflation putting pressure on their cost bases. Interest rates are also expected to continue rising, causing a likely economic slowdown, increasing unemployment, and falling house prices.

These factors are expected to lead to raised provisions in the years ahead.

KPMG head of banking Steve Jackson said: “Now more than ever is the moment for the [banks] to accelerate their digital transformation efforts, to reduce their reliance on (increasingly expensive) FTE and bring efficient, technology-enabled solutions to their core middle and back office processes, where much of the scale of their cost bases exist. [They] will be striving to enter a potential economic contraction with strong credit quality, a lean cost base and a strong digital capability.”