Fitch Ratings said that while major bank profitability is likely to remain solid in the year ahead, actual profit growth is set to slow as credit growth eases.
The ratings agency said the banks' combined net profit of $31bn for the financial year was a 7.6% increase on the previous year, net interest margins are being challenged by fierce competition while wholesale funding costs have increased.
"Nevertheless, the major banks' NIM still compares strong to similar rated peers globally. Asset quality remained solid but it appears that the credit cycle has bottomed as loan impairment charges increased for most banks," Fitch said.
Fitch said market conditions were expected to weaken over the next financial year, and the residential housing boom was predicted to slow.
"Fitch expects the major banks' FY16 results will be impacted by a softer operating environment and slower growth prospects, as well as continuing NIM pressure, possibly higher impairment charges, and more technology spending particularly when expense management experiences greater scrutiny," the agency said.
In spite of this, Fitch said net interest margins are likely to remain strong relative to the major banks' international peers.
While the major banks have announced strong profits for the financial year, a ratings company believes this is set to slow over the next 12 months.