Australia's big four banks reported a cash profit of after tax of $15.2 billion for the 2018 half year, down 2 per cent on the prior corresponding period, according to an analysis report by KPMG.
The report found that while loan impairments and margins are improving for the banks, the slip in cash profit "indicates the difficult regulatory and operating environment facing the majors".
Slowing revenue growth, rising capital levels, and increasing legal and remediation costs are weighing on the banks as they work to restore trust after a series of scandals.
KPMG Australia head of banking Ian Pollari said: "Despite slowing demand for credit and increasing regulatory and capital costs, the majors are accelerating their efforts to transform their business portfolios, invest in digital capabilities and simplify their operating models."
KPMG head of financial services Adrian Fisk said the half-year results "begin to reflect the transformation of the industry that is underway and as the majors re-shape their business models for the future to reflect the societal, regulatory and technology agenda."
"Careful consideration of the needs of all stakeholders will be required in their strategic decision-making," Mr Fisk said.
Average net interest margin for the banks was 203 basis points (bps) on a cash basis, up 3 bps compared to first-half 2017.
The capital position of of the bank continued to rise, with their average Common Equity Tier 1 (CET1) capital ratio rising by 20 basis points over the half year to an average of 10.5 percent of risk-weighted assets (RWAs), said KPMG.
