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 may have softened some of its proposed tax reforms, but it has exposed a bigger issue: too many families are relying on wealth structures that no longer reflect the realities of modern life.
3 min
For many Australians, the 2026 Federal Budget initially felt like a direct challenge to the way wealth is created, held and transferred between generations.
The headlines were immediate: changes to capital gains tax, reforms to discretionary trusts, restrictions on negative gearing and increased scrutiny of investment structures. Unsurprisingly, affluent families, business owners and investors began asking the same question:
Is the way we hold our wealth still fit for purpose?
In recent days, the government has announced several significant amendments following industry consultation and public feedback, including exempting testamentary trusts from the proposed 30 per cent minimum tax and expanding capital gains tax concessions for small businesses.
The backdown is welcome. But it also highlights something much bigger.
This Budget has accelerated a conversation that many Australian families have been postponing for years.
The conversation is not really about tax. It is about wealth stewardship.
For decades, Australians have built wealth through businesses, property, investments and careful long-term planning. Yet many families have not revisited the legal structures surrounding those assets in years, sometimes decades.
We often see clients who have spent years building significant wealth, only to discover their legal arrangements no longer reflect their current circumstances.
Their children are now adults. They may own multiple properties.
They may have sold a business, entered a second marriage, become grandparents or accumulated digital assets that did not exist when their original estate plans were prepared.
The trust that distributes income may need to be reconsidered. The bucket company may no longer be so attractive.
The Budget has simply exposed a reality that already existed: wealth structures cannot remain static while life continues to evolve.
Importantly, trusts themselves are not the issue.
Trusts are legitimate planning tools that provide flexibility, protection and continuity. When used appropriately, they allow families to adapt to changing circumstances over time.
And neither is tax the issue, really. Getting the fundamentals right is more important for long-term, sustainable wealth than a few favourable tax treatments around the edges.
The real issue is complacency.
Too often, families create structures and assume the job is done. It isn’t.
Estate planning is no longer a document you sign once and file away in a drawer. It is an ongoing process that should evolve alongside your life.
We are also seeing a broader shift in how Australians define wealth itself. It is no longer just the family home and an investment portfolio.
Modern wealth includes businesses, digital assets, cryptocurrency, intellectual property, frequent flyer points and increasingly complex family arrangements.
At the same time, Australians are living longer than ever before, meaning wealth may need to support multiple generations simultaneously. This creates new responsibilities and new risks.
How do you help your children enter the property market without exposing family wealth to relationship breakdowns?
How do you structure wealth so that it remains a source of opportunity rather than future conflict?
These are the questions families should be asking now.
The recent debate surrounding testamentary trusts also serves as an important reminder that policy decisions can have unintended consequences for vulnerable Australians. It is encouraging that the government has listened to feedback and clarified its position.
But the lesson remains: the wealth landscape is changing.
Increasingly, governments, regulators and tax authorities are paying closer attention to how wealth is held and transferred. That means families cannot afford to adopt a “set-and-forget” approach to their structures.
The families who will be best placed for the future are not necessarily those with the greatest wealth.
They are the families with the greatest clarity. Clarity around ownership, succession and governance. And clarity around how wealth will transition from one generation to the next.
Ultimately, preserving wealth is not about avoiding change.
It is about preparing for it.
Because the greatest risk is not change itself.
It is losing the ability to respond to it.
Anthony Hunt is Co-Founder of Wealth Lawyers and former COO of Westpac Private Bank. He advises business owners, investors and affluent Australian families on wealth protection, succession planning and intergenerational wealth transfer
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