2025 Banking sector outlook: Cautious optimism amid fast-changing environment
Introduction
Introduction
The banking industry in 2025 will navigate moderate economic expansion, low interest rates and shifting geopolitical scenarios. While challenges exist, these conditions will fuel growth across the banking spectrum – from IB and capital markets, trading and research to corporate lending. The role of technology and AI, regulation and ESG will continue to grow. Given this evolving landscape and focus on operational efficiencies, partnering with an outsourcing provider could be a key differentiator for banks. Overall, the opportunities foreseen in 2025 inspire a sense of cautious optimism as banking executives prepare to navigate a dynamic environment.
Key Takeaways
In this report, we provide you with a forward-looking perspective and insights into the rapidly evolving banking industry, and equip you with the necessary information required to thrive and stay-ahead in this sector.
Here are some of the key takeaways that we explore in depth in the outlook:
1. Dynamic but opportune environment for banks to capitalise on the global monetary easing – focusing on portfolio growth and increasing deal flow – while keeping an eye on geopolitical developments
2. As high funding costs put pressure on interest margins, there will be more focus on IB & advisory and trading
3. Increased lending and AI-related advances would lead to a greater demand for compliance and regulation
4. As private credit continues its rapid ascent, banks will look to formulate strategies to participate in their growth
5. Applications and implementations of Generative AI (GenAI) and Agentic AI in banking will provide them with a competitive advantage
6. Advances in technology, particularly in AI, will revamp digital lending processes
7. The integration of ESG factors in banking is set to continue as sustainability becomes more mainstream
8. Banks will increasingly leverage outsourcing to enhance operational efficiencies and improve margins
Conclusion
Against a challenging macroeconomic backdrop, the speed with which banks adapt (and execute) will define their year. A plethora of opportunities exist across several key departments – including IB & advisory, research and trading – to offset pressures on profitability from falling interest rates and rising costs. Technology will continue to play a larger, fundamental role in shaping fortunes. Banks will increasingly look towards offshoring firms as key partners for three major factors – execution, technology and compliance – enabling them to operate more efficiently and save costs, leverage technology as a growth driver and gain access to a wide spectrum of compliance-related expertise. All in all, we expect 2025 to be a year of opportunities amid challenges and uncertainties.
About the Authors
Avishek Suman manages the Investment Research business at Acuity Knowledge Partners, Beijing. He has close to 19 years of work experience in research, including 15 years in Acuity Knowledge Partners. Prior to assuming this responsibility in Beijing, Avishek served as Delivery Manager for buy-side and sell-side clients.
Ismadi has close to 13 years of work experience across lending services, investment research, and corporate finance, including 8 years in Acuity Knowledge Partners. At Acuity, he manages multiple teams across leveraged lending, structured finance, and corporate lending. Prior to joining Acuity, Ismadi was a Senior Manager at PwC Sri Lanka, leading its Corporate Finance and Valuation Team.
Rohan has been with Acuity for over 13 years. He has extensive experience in managing IB engagements for clients across the globe - from bulge bracket IBs in North America to mid-market advisory firms in Asia - and has supported coverage teams across various sectors including Consumer & Retail, Metals & Mining, Healthcare, Industrials, Business Services and TMT. Rohan holds an MBA in Finance from the IILM Graduate School of Management.
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