According to McKinsey & Company’s Global Banking Annual Review published on Thursday, the global banking sector achieved record profits of around USD 1,2 trillion last year. Other metrics — including a record-high return on equity (ROE) of 10,3 percent, rising capital ratios (13 percent), and strong profit margins — reinforced the positive picture. Favorable factors such as high interest rates and low risk costs contributed to this exceptional performance, the report noted.

However, conditions have since shifted, and many banks still find it difficult to adjust to macroeconomic uncertainty, competition from fintech firms, and advancing technology.

Strategic Precision

To capture the next wave of growth, banks need to abandon ineffective strategies and focus on creating value for all stakeholders, even under tougher conditions. According to McKinsey, «strategic precision» is now essential — including in the area of artificial intelligence (AI) — to seize new growth opportunities. This applies to technology and AI, customer management, capital efficiency, and strategic M&A approaches.

Swiss banks were well-positioned internationally in 2024, with a combined net profit of USD 16,4 billion. However, even in Switzerland, the need for strategic transformation has become apparent due to the loss of market share in private banking.

The overall situation in the banking sector has deteriorated as a result of macroeconomic conditions. Contributing factors include the changing interest rate environment, intensified competition, shifting customer behavior, and doubts about innovation capabilities despite rapid technological advances. Previous strategies focused on macroeconomic resilience, scale, and stability are no longer necessarily effective in today’s market.

Rapid Response Required

Investor expectations demand precise and strategic evolution. «The weakening macro environment calls for quick commercial responses,» said Jan Quensel, Partner and Head of the Swiss Banking Practice at McKinsey. «At the same time, Swiss banks need strategic answers to the emergence of new customer segments, active participation in global M&A, and developments in technology. Precision and speed are crucial — particularly in the use of AI.»

(Image: McKinsey)

While the potential of AI is widely recognized, implementation remains limited and primarily focused on internal processes rather than on acquiring new clients and assets. AI offers the greatest lever for achieving productivity gains in banking and scaling processes with new precision. McKinsey estimates an industry-wide cost reduction potential of 15 to 20 percent.

Bank customers, meanwhile, are becoming increasingly digital and less loyal. They are using banking products and services more selectively. As a result, value pools — especially in deposits and payments — are at risk of significant disruption, which could lead to declining profits.

«Almost one-third of AI-using bank customers who opened a new account in the past two years report having used generative AI to select their provider,» McKinsey writes.