Mutual Banks

Beyond scale: the next chapter for mutual banks

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  • Insight
  • 5 minute read
  • November 09, 2026

Greater scale, modest earnings growth

In March 2026, our publication How Australia's mutual banks can thrive through disruption1 identified five battlegrounds and a strategic choice for boards: combine, collaborate or compete. Our analysis of the 30 June 2026 results of Australia's ten largest customer-owned banks2 provides an early indication of how the sector is responding.

The sector continued to grow and consolidate, but the earnings uplift remains modest relative to balance sheet expansion. Aggregate profit before tax increased 5.6% to $662m, supported by lending volume growth of 11.6%. Rising operating expenses and weaker other income offset the additional margin achieved from this growth. The next challenge is converting greater scale into sustainable profitability and operating efficiency.

The opportunity lies beyond the product shelf

Net interest income accounted for approximately 94% of total income across the banks analysed. This concentration leaves earnings closely linked to lending and deposit pricing in a market where scale can provide a competitive advantage.

Our March publication highlighted the opportunity for mutual banks to support members' broader financial wellbeing, building on their community relationships, member focus and established trust. This offers a potential point of differentiation beyond rates and traditional banking products. Targeted investment in data and digital services, alongside partnerships with technology providers and other mutuals, could deepen member relationships and broaden sources of income. The question is which capabilities to build, which to access through collaboration and how to translate these investments into better member outcomes.

Growth outpaces the market, at a cost to funding

Lending grew 11.6% and deposits 9.5%, compared with system growth of 5.4% and 6.5%, respectively. Growth was supported by competitive product offerings and the greater scale and capital capacity delivered through balance sheet management. 

Funding this expansion has become more expensive. Competition for deposits has placed pressure on margins, with net interest income increasing 7%, below reported loan and deposit balance growth. If funding pressure persists, sustaining earnings growth through lending volumes alone may become increasingly challenging.

Costs rise as efficiency gains remain modest

Operating expenses rose 5.6% ($126.6m) to $2.4bn, while the expense-to-income (ETI) ratio remained broadly flat at 77.7%. This highlights the challenge of translating increased income into operating leverage.

Technology modernisation, cyber resilience, regulatory compliance and workforce capability continue to require investment. 

The next test is whether integration benefits and technology investment can deliver measurable, lasting productivity gains. Without this, greater scale risks adding cost and complexity without materially improving operating efficiency.

Credit quality sound, capital provides capacity

Credit impairment expense increased by 53.3% to $19.5m, albeit from a low base. Credit provisions rose 10.3% to $159m, broadly in line with loan book growth, with provision coverage remaining at 13 basis points.

There was limited evidence of widespread borrower stress. Continued household financial pressures warrant close monitoring of arrears, portfolio performance and the assumptions underpinning ECL estimates. 

The average common equity tier 1 (CET1) ratio was broadly stable at 16.84%, providing capacity to support growth and continued investment. The challenge is deploying that capacity in ways that generate sustainable returns and tangible value for members.

From scale to value

The FY26 results reinforce that scale is an important enabler of competitiveness, but not a guarantee of stronger outcomes. Mutual banks have demonstrated their ability to grow and consolidate, while improvements in profitability and efficiency have been more restrained.

The priority remains to build scale and extracting value from it: realising integration benefits, strengthening operating efficiency, protecting funding margins and deepening member relationships. Those that combine disciplined execution with a differentiated member proposition will be best positioned to turn scale into sustainable returns and better member outcomes. 

Our detailed analysis addresses the areas that shaped the current period3:

Earnings and returns

Profit before tax
+5.6% YoY
$662m

Pre-tax profit increased 5.6% to $662m, a $34.8m increase. Higher net interest income from balance sheet expansion was partly absorbed by rising operating costs and lower non-interest income, tempering the benefit of strong lending growth


Return on assets
+4.1% YoY
0.32%

ROA improved modestly to 0.32%, supported by 5.5% growth in net profit after tax to $468.3m. With assets increasing 11.3%, translating enlarged balance sheets into sustainable returns remains a key test for the sector.

Revenues

Net interest income
+7.0% YoY
$2.9bn

NII rose 7.0% to $2.9bn, supported by growth in net interest-earning assets, while disciplined pricing strategy and optimisation of the product mix provided additional support to NII growth.


Other operating income
-9.5% YoY
$194m

Other operating income declined 9.5% to $194m, reflecting softer fees, commissions and dividend income. This reinforces the sector's dependence on NII to generate earnings.

Lending

Lending growth GLAA growth
+563 bps YoY
11.6%

Lending grew 11.6%, outperforming system growth of 5.4%, reflecting strong expansion across residential mortgages and commercial lending. Growth was supported by competitive product offerings and continued investment in digital lending capabilities, while merger activity provided additional scale and capacity to support further lending growth.


Deposit growth
+387 bps YoY
9.5%

Deposits increased 9.5%, supported by competitive savings products. This outperformed system growth of 6.5% but lagged lending growth, keeping deposit retention, funding mix and wholesale funding access in focus.

Expenses

Operating expenses
+5.6% YoY
$2.4bn

Operating expenses increased 5.6%, $126.6 million to $2.4bn, reflecting continued investment in technology modernisation, cyber resilience, regulatory compliance and people. Merger integration added complexity, reinforcing the need to convert increased scale into lasting efficiencies.

Expense-to-income
-0.2% YoY
77.7%

The expense-to-income ratio improved 20bps to 77.7% as income growth modestly outpaced costs. However, the elevated ratio highlights the challenge of funding essential capability investment while delivering efficiency improvements and member value.

Asset quality

Credit impairment expense
+53.3% YoY
$19.5m

Credit impairment expense increased by 53.3% to $19.5, reflecting higher collective ECL charges and loan write-offs of c.$5 million. Credit losses remain modest relative to loan balances, with limited evidence of widespread credit stress.


Credit provisions
+10.3% YoY
$159m

Credit provisions rose 10.3% to $159m, broadly in line with lending growth. Higher collective allowances reflect a cautious approach to macroeconomic uncertainty, notwithstanding generally resilient credit performance across the banks reviewed.

Balance sheet

Credit provision cover Total provisions for credit impairment as a % of GLAA
+0% YoY
0.13%

Provision coverage remained at 13bps, as provisions and lending balances rose at broadly similar rates. Credit losses remain relatively low, although persistent household pressures warrant continued scrutiny of arrears and forward-looking ECL assumptions.


Core equity T1 Common equity tier 1 ratio (%)
+15 bps YoY
16.84%

CET1 capital remained broadly stable at 16.84%, or $9.1 billion, and well above the minimum regulatory requirement of 8%. The sector’s capital position provides mutuals with capacity to support growth and reinvest in customers and communities, while continuing to fund strategic priorities across technology, cyber security and digital capability.

About the authors

Nina Larkin
Nina Larkin

Partner, Risk and Regulation, PwC Australia

Kristy  van Horck
Kristy van Horck

Partner, Assurance - EUR, PwC Australia

 James Rogers
James Rogers

Director, PwC Australia

1 https://www.pwc.com.au/value-in-motion/how-australias-mutual-banks-can-thrive-through-disruption.html

2 Trading names: People First Bank, NGM Group, Great Southern Bank, Bank Australia, Teachers Mutual Bank, Beyond Bank, P&N Bank, Qudos Bank, Regional Australia Bank and Defence Bank.

3 This analysis is based on the FY26 financial results of Australia's ten largest customer-owned banks. Comparative figures have been adjusted, where applicable, for merger activity and changes in group structure to provide a like-for-like assessment of financial performance and growth. 

© 2026 PricewaterhouseCoopers. All rights reserved. PwC refers to the Australia member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

This report has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this report without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this report, and, to the extent permitted by law, PricewaterhouseCoopers, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this report or for any decision based on it. PwC’s Liability limited by a scheme approved under Professional Standards Legislation.

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Noel Williams

Noel Williams

Partner, Banking and Capital Markets Leader, PwC Australia

Nina Larkin

Nina Larkin

Partner, Risk and Regulation, PwC Australia

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