Why 2025 Could Be a Great Year for Big Banks

Top global banks have taken off in recent years, but ascents can be bumpy. In 2025, they might get to relax while on cruise speed.

The Federal Reserve recently signaled that interest rates might only be cut twice in the year ahead as a result of stickier-than-expected inflation, prompting stocks generally to sell off. But rates being “less high for longer” is actually great news for banks, and the latest sign that 2025 might be a good year for almost all of the many business lines that comprise large universal lenders.

This hasn’t been the case in recent times, even when financial firms overall were doing really well. In 2022, the big rebound in global trade that followed production stoppages during the depths of the pandemic resulted in a surge in sales for such transaction-focused intermediaries as Citigroup , HSBC Holdings and BNP Paribas . Desks that trade fixed income, currencies and commodities, or FICC, saw client flows balloon, as Russia’s full-scale invasion of Ukraine and the start of the rate-tightening cycle sparked a sudden demand to hedge rates, foreign exchange and energy prices around the world. The likes of JPMorgan Chase and Deutsche Bank benefited greatly.

But adverse monetary and geoeconomic conditions caused underwriting fees to collapse, as companies all simultaneously held off on issuing equity and debt.

Then came 2023. Large-bank revenue jumped once again, this time mostly driven by an 11% increase in net interest margins, Visible Alpha data shows. After a decade and a half, the industry was finally getting to benefit from a larger spread between what it was able to charge borrowers and pay to depositors. Yet, at the same time, dealmaking tumbled because of high borrowing costs and heightened economic and geopolitical uncertainty.

Some of the lopsidedness has persisted this past year, mostly because central banks have lowered rates again. That resulted in a fall in net interest income that has hit revenue in commercial and wealth-management arms, but also transaction banking, which does a lot of cash management for firms. Traders of government bonds and other rate-related products have had a tepid year. And, overall, revenue growth has slowed.

Nevertheless, 2024 is when the market truly rewarded bank stocks. The banking subcomponents of the S&P 500 and the Stoxx Europe 600 have returned 35% and 32%, respectively, compared with 25% and 6% for the broader indexes.

This underscores the importance that today’s investors attribute to getting predictable, well-diversified returns from their banks, rather than having another year with a quarter of revenue coming from FICC.

Indeed, this past year was still one of normalization. Mergers and initial public offerings bounced back a bit, and many corporate treasurers had to refinance their debt to avoid an incoming wall of bond maturities. And, even if investors eschewed government debt, they gobbled up the kinds of fixed-income products that offered a spread over it, such as corporate bonds, in an attempt to lock in high yields for the long run.

This is a good omen for the year ahead.

For the first time since 2021, all of the divisions of the world’s top banks except FICC trading are forecast to expand revenue, according to a median of analyst estimates compiled by Visible Alpha. Even that dark spot might end up brightening: As of early December, yields on three-month Treasury bills have been trading below those of 10-year paper for the first time since 2022, which might soon trigger renewed enthusiasm for fixed income.

Regardless, steeper yield curves will almost certainly be good for banks, serving to widen net interest margins.

To be sure, officials easing borrowing costs by less than previously expected could hit consumers and cause trouble for some commercial real-estate loans. The European economy in particular is quite weak. Still, the impact is likely to be small. Default rates remain low.

Crucially, 2025 looks likely to be the year in which the advisory business gathers momentum after a tentative comeback. Private-equity firms are being pressured to start exiting their investments after years of waiting it out. While sponsors have been coming up with new delaying tactics, such as rolling over assets into “continuation funds,” the management-consulting firm Bain estimated that 46% of companies owned by private-equity funds were held for four years or longer by the end of 2023, which was the highest level since 2012.

If, on top of this, the Trump administration eases regulatory scrutiny both on the financial sector and on mergers, banks will enjoy yet another tailwind , with Goldman Sachs probably coming out on top.

Banks might finally be firing on all cylinders.

There has rarely, if ever, been so much tech talent available in the job market. Yet many tech companies say good help is hard to find.

What gives?

U.S. colleges more than doubled the number of computer-science degrees awarded from 2013 to 2022, according to federal data. Then came round after round of layoffs at Google, Meta, Amazon, and others.

The Bureau of Labor Statistics predicts businesses will employ 6% fewer computer programmers in 2034 than they did last year.

All of this should, in theory, mean there is an ample supply of eager, capable engineers ready for hire.

But in their feverish pursuit of artificial-intelligence supremacy, employers say there aren’t enough people with the most in-demand skills. The few perceived as AI savants can command multimillion-dollar pay packages. On a second tier of AI savvy, workers can rake in close to $1 million a year .

Landing a job is tough for most everyone else.

Frustrated job seekers contend businesses could expand the AI talent pipeline with a little imagination. The argument is companies should accept that relatively few people have AI-specific experience because the technology is so new. They ought to focus on identifying candidates with transferable skills and let those people learn on the job.

Often, though, companies seem to hold out for dream candidates with deep backgrounds in machine learning. Many AI-related roles go unfilled for weeks or months—or get taken off job boards only to be reposted soon after.

Playing a different game

It is difficult to define what makes an AI all-star, but I’m sorry to report that it’s probably not whatever you’re doing.

Maybe you’re learning how to work more efficiently with the aid of ChatGPT and its robotic brethren. Perhaps you’re taking one of those innumerable AI certificate courses.

You might as well be playing pickup basketball at your local YMCA in hopes of being signed by the Los Angeles Lakers. The AI minds that companies truly covet are almost as rare as professional athletes.

“We’re talking about hundreds of people in the world, at the most,” says Cristóbal Valenzuela, chief executive of Runway, which makes AI image and video tools.

He describes it like this: Picture an AI model as a machine with 1,000 dials. The goal is to train the machine to detect patterns and predict outcomes. To do this, you have to feed it reams of data and know which dials to adjust—and by how much.

The universe of people with the right touch is confined to those with uncanny intuition, genius-level smarts or the foresight (possibly luck) to go into AI many years ago, before it was all the rage.

As a venture-backed startup with about 120 employees, Runway doesn’t necessarily vie with Silicon Valley giants for the AI job market’s version of LeBron James. But when I spoke with Valenzuela recently, his company was advertising base salaries of up to $440,000 for an engineering manager and $490,000 for a director of machine learning.

A job listing like one of these might attract 2,000 applicants in a week, Valenzuela says, and there is a decent chance he won’t pick any of them. A lot of people who claim to be AI literate merely produce “workslop”—generic, low-quality material. He spends a lot of time reading academic journals and browsing GitHub portfolios, and recruiting people whose work impresses him.

In addition to an uncommon skill set, companies trying to win in the hypercompetitive AI arena are scouting for commitment bordering on fanaticism .

Daniel Park is seeking three new members for his nine-person startup. He says he will wait a year or longer if that’s what it takes to fill roles with advertised base salaries of up to $500,000.

He’s looking for “prodigies” willing to work seven days a week. Much of the team lives together in a six-bedroom house in San Francisco.

If this sounds like a lonely existence, Park’s team members may be able to solve their own problem. His company, Pickle, aims to develop personalised AI companions akin to Tony Stark’s Jarvis in “Iron Man.”

Overlooked

James Strawn wasn’t an AI early adopter, and the father of two teenagers doesn’t want to sacrifice his personal life for a job. He is beginning to wonder whether there is still a place for people like him in the tech sector.

He was laid off over the summer after 25 years at Adobe , where he was a senior software quality-assurance engineer. Strawn, 55, started as a contractor and recalls his hiring as a leap of faith by the company.

He had been an artist and graphic designer. The managers who interviewed him figured he could use that background to help make Illustrator and other Adobe software more user-friendly.

Looking for work now, he doesn’t see the same willingness by companies to take a chance on someone whose résumé isn’t a perfect match to the job description. He’s had one interview since his layoff.

“I always thought my years of experience at a high-profile company would at least be enough to get me interviews where I could explain how I could contribute,” says Strawn, who is taking foundational AI courses. “It’s just not like that.”

The trouble for people starting out in AI—whether recent grads or job switchers like Strawn—is that companies see them as a dime a dozen.

“There’s this AI arms race, and the fact of the matter is entry-level people aren’t going to help you win it,” says Matt Massucci, CEO of the tech recruiting firm Hirewell. “There’s this concept of the 10x engineer—the one engineer who can do the work of 10. That’s what companies are really leaning into and paying for.”

He adds that companies can automate some low-level engineering tasks, which frees up more money to throw at high-end talent.

It’s a dynamic that creates a few handsomely paid haves and a lot more have-nots.

Why 2025 Could Be a Great Year for Big Banks

After a few bumpy years of both successes and setbacks, lenders might finally be firing on all cylinders

A divide has opened in the tech job market between those with artificial-intelligence skills and everyone else.

Playing a different game

Overlooked