Big bank margins under pressure; Australia's major banks may have reported stellar half year results across the board, but competition is continuing to put heavy pressure on margins.

All of the "big four" banks have seen their margins decline as competition from second tier banks and non-bank lenders erodes traditional revenue streams.

While Westpac chief executive David Morgan agrees the banking sector is in an economic "sweet spot" he expressed concern at the direction of margins after Westpac's fell six basis points to 2.4 percent.

"I think margin compression is going to continue. We've had very big step downs over the past 15 years and I don't think we've got to the end of that process yet," Morgan said.

"In corporate credit for example there's been enormous compression there--about 15 percent decline in margin for high …