Noninterest expense isn’t a headline grabber, but in the world of Australian banking, it’s a powerful force. As 2025 unfolds, this crucial line item—covering everything from employee salaries to IT upgrades—directly influences bank profitability and, by extension, the pricing and availability of loans, savings accounts, and digital services for everyday Australians. Whether you’re a business owner, an investor, or just managing your household finances, understanding noninterest expense is more relevant than ever.
What Exactly Is Noninterest Expense?
Noninterest expense refers to the operating costs a bank incurs that are unrelated to the interest it pays on deposits or earns from loans. It encompasses:
- Salaries and employee benefits (often the largest single cost)
- Technology and IT systems (especially cybersecurity and mobile banking platforms)
- Occupancy costs (rent, utilities, maintenance of branches and offices)
- Marketing, legal, and regulatory compliance
- Depreciation and amortisation of physical and intangible assets
In 2025, Australian banks are under pressure to manage these expenses efficiently. With digital transformation accelerating and regulatory requirements tightening, noninterest expense is in the spotlight—not just for bank executives, but for anyone who cares about the cost and quality of their banking services.
2025 Trends: The Digital Push and Regulatory Pressures
The past few years have been a whirlwind for the banking sector. In 2025, several forces are shaping the noninterest expense landscape in Australia:
- Accelerated digital transformation: With more Australians banking online, banks are investing heavily in mobile apps, digital ID, and cybersecurity. For example, Commonwealth Bank’s 2025 annual report highlights a 12% year-on-year increase in technology spend, much of it classified as noninterest expense.
- Branch network rationalisation: As digital adoption rises, banks are trimming physical branches. ANZ’s recent closure of 60 rural locations in late 2024 alone is a case in point, with savings redirected to tech upgrades.
- Increased compliance costs: Stricter regulations, including updates to the Anti-Money Laundering and Counter-Terrorism Financing Act and new APRA cyber standards, are pushing compliance-related noninterest expenses higher.
- Inflationary pressures: While wage growth is moderating compared to 2023, the lingering effects of elevated inflation mean staff and supplier costs remain a challenge.
Banks are now tasked with balancing these investments against the need to stay profitable and competitive, while also keeping fees reasonable for customers.
Why Noninterest Expense Matters for Everyday Australians
At first glance, noninterest expense might seem remote from your daily financial life. But it’s a critical driver of the products, services, and costs you encounter as a bank customer. Here’s how:
- Product pricing: Higher noninterest expense can push banks to raise account-keeping fees, loan application costs, or reduce the rate of interest on savings products.
- Service quality: When banks invest in digital platforms or branch upgrades, these are reflected in noninterest expenses. Customers benefit from better apps and services, but banks must keep spending under control to avoid passing on costs.
- Innovation vs. cost-cutting: The pressure to manage expenses can lead banks to innovate (e.g., launching AI-powered chatbots) or to cut back (e.g., reducing call centre hours). The balance struck affects your day-to-day banking experience.
For example, NAB’s 2025 financial update revealed a $100 million increase in technology-related noninterest expense, but also a 15% drop in branch operating costs as more customers went digital. The result? Faster online service, but fewer in-person options in some regions.
How Banks—and Customers—Can Respond in 2025
Banks are deploying a mix of strategies to control noninterest expense:
- Process automation to reduce manual workloads in areas like loan processing and customer onboarding
- Outsourcing non-core functions such as IT support or document management
- Rationalising real estate by closing or consolidating branches and offices
- Partnering with fintechs for cost-effective service enhancements
For Australian consumers, the key is to stay informed and proactive:
- Compare fees and features across banks, as expense pressures may drive differentiation in product offerings
- Take advantage of digital banking tools, which are often cheaper to operate and can deliver better value
- Be alert to changes in branch access or service levels, especially if you live in a regional area
The Bottom Line: Noninterest Expense Shapes Your Financial World
Noninterest expense may be an accounting term, but in 2025 it’s at the heart of how Australian banks operate—and how much you pay for their services. As digital transformation and regulation reshape the sector, keeping an eye on these costs is essential for both banks and consumers. The next time your bank updates its app, closes a branch, or tweaks its fees, there’s a good chance noninterest expense is the reason why.
