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
3 min
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.
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The federal budget has rattled property investors. But the biggest mistake isn’t the tax changes, it’s the conclusion many are drawing from them.
2 min
The recent budget has forced a reckoning for property investors.
Negative gearing now restricted to new residential builds, the CGT discount gone and on paper, the numbers look different.
And many investors are responding by pivoting toward yield, prioritising cash flow over capital growth in a way that property strategists say misses the point entirely.
“The debate has shifted to yield versus growth as if they are opposing forces,” says Abdullah Nouh, founder of Melbourne-based buyers’ agency Mecca Property Group. “But that framing is itself the mistake.”
Nouh, who works with high-net-worth families and investors on long-term acquisition strategy, argues that capital growth remains the primary driver of genuine wealth creation and that the post-budget environment has made quality assets more important, not less.
The numbers make his case plainly. An additional $500 per week in rental income is welcome. A prestige asset appreciating by $1 million over a market cycle is transformative.
These are not equivalent outcomes, and portfolios built around yield at the expense of location and land value tend to generate income while wealth stands largely still.
The more nuanced shift Nouh is seeing among sophisticated investors is a move toward assets where both outcomes can be engineered simultaneously – established homes on substantial land in quality locations, where the existing dwelling can be repositioned, rental returns improved, and the underlying land value compounds independent of what sits on it.
For investors with existing equity, commercial property is also entering the conversation in a more serious way.
Prestige industrial assets, medical centres and long-leased essential retail offer income profiles that residential property in most capital city markets cannot currently match: longer lease terms, tenants covering outgoings, and greater predictability than the residential tenancy cycle.
“The investors who build lasting wealth are rarely the ones who chased yield or growth exclusively,” says Nouh.
“They are the ones who built a strategy they could sustain – one that generated enough income to hold quality assets through multiple cycles while those assets compounded in value.”
The budget has changed the settings. It has not changed the fundamentals.
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