New Strategies for New Times: How Banks Can Stay Ahead
According to McKinsey & Company’s Global Banking Annual Review 2025, the banking sector stands at an inflection point. Despite improving valuations and achieving record global profits —$1.2 trillion in 2024— banks’ market valuations, measured by the price-to-book ratio, remain on 67% below the average of all other industries. This gap, the report notes, reflects investors’ doubts about the sustainability of current profits amid margin normalization (as rate hikes no longer provide support), accelerated digital transformation (new competitors and the rise of AI), and shifting consumer behavior. In this new environment, McKinsey concludes that the future of banking will not be defined by scale, but by strategic precision —the ability to combine technology, capital discipline, and deep customer insight.
- From Scale to Precision: Broad-based strategies are no longer sufficient. McKinsey calls for “strategic surgery” across four fronts:
- Technology: adoption of agentic and generative AI;
- Customer: hyperpersonalized and digitally integrated experiences;
- Capital: micro-level balance sheet discipline —product by product, client by client;
- M&A: targeted acquisitions focused on capabilities rather than size.
- The rise of agent-based artificial intelligence: If margins decline and risk costs rise in the coming years, as the report suggests, banks will need to make an extra effort to control expenses. AI will be key, as it will redefine the banking operating model. On average, cost base savings of up to 20% could be achieved, but McKinsey warns that competition will eventually pass much of those benefits on to customers. Early adopters could increase their ROTE by up to four percentage points, while laggards may fall below their cost of capital.
- A More Digital, Less Loyal Consumer: Only 4% of new U.S. credit card applicants choose their current bank without comparing alternatives (down from 10% in 2018). Customer loyalty is giving way to AI-driven, mobile-first hyperpersonalization. “Financial agents” —AI systems optimizing deposits or consolidating debt— could erode up to 9% of global banking profits unless institutions adapt their business models.
- Efficient, Not Excess Capital: Leading banks will distinguish themselves through capital precision —freeing trapped resources and reallocating them to high-return, growth-oriented areas. On M&A, successful deals will prioritize capabilities over scale.
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