# Banking and capital markets industry trends: PwC

## Introduction

At the outset of 2025, the picture that’s developing for banking and capital markets firms at the regional, national and global level points toward a favorable time to take a bolder approach to growth. Whether it’s dealmaking, new markets or a more aggressive pursuit of existing customers’ wallets, we believe firms should be actualizing their expansion plans in anticipation of better times ahead.

At the sector level, the foundations are solid for banking and capital markets: an expanding US economy, tumbling benchmark interest rates, steady loan demand and increasing securities trading volumes. Expanding profits this year supports a bolder stance on growth. For example, 2025 US bank net interest income is projected to increase 5.7% year on year, according to S&P Capital Global Market Intelligence, a step up from essentially no growth last year.

There is hope that the sector’s prospects could rapidly improve after the surprising  in the November election. The GOP wants to revive the country’s “animal spirits” by streamlining regulatory burdens and taking a pro-growth, pro-business approach to policy. If Republicans can deliver, companies likely will seek fresh growth capital by tapping capital markets. The strategic risk in banking, in our view, is not preparing for an influx of demand: Are the right relationships in place and if so, are sales teams prepared to win the opportunity? Is there balance sheet capacity to take on this new activity? Are executives ready to expand into other areas of finance, including non-traditional segments such as infrastructure lending and asset-based finance?

At the global level, the current situation is also favorable for US banking and capital markets firms. China’s once-fast growing economy is struggling, and the country’s industrial policy is making it more difficult for US multinationals to operate there. Additionally, Chinese GDP isn’t close to surpassing the US and some economists now say it never will. Japan is growing again, but decades of stagnation have dulled its allure. And Europe’s major countries — France and Germany — are in political turmoil to the detriment of their economies and markets. If you’re a starry-eyed entrepreneur, a hard-charging start-up or a major corporation, where would you want to be domiciled right now to fuel your expansion? We think the friendliest operating environment for the foreseeable future is the US.

2025 is going to be full of change. But a US recession currently appears unlikely. And if the picture develops as we think it could, then a bolder approach to growth is warranted.

## Strategies and topics for 2025

- 
- 
- 

## Environment allows banks to go on offense

Optimism is rising among banking and capital markets executives. The combination of continued Federal Reserve rate cuts, Trump’s pro-growth agenda and expectations for streamlined regulations creates an environment primed for banks to go on offense. Expanding loan origination activity and pursuing capital markets underwriting appear to be attractive early 2025 growth drivers as corporations adapt their strategies in response to the pro-business tone coming out of Washington, D.C. CEOs, generally, are upbeat about their business’s prospects this year. Chief Executive Group’s post-election December CEO poll showed 73% forecasted an increase in profits a year in the future, the highest proportion since August 2021 when COVID-19 restrictions eased, spurring economic optimism.

Banks, though, can’t lose sight of pursuing the most capital efficient growth in this time of higher funding costs and volatile spread income. Technology upgrades and core modernization give many institutions greater precision in identifying those efficient growth paths. Leveraging software applications combined with data-at-scale can pinpoint those customers who are most open to relationship-driven banking and deliver personalized services. Other institutions may look to richer sources of third-party data afforded by  regulations to enter new markets or offer products based on an individual’s financial history.

There are even larger growth possibilities for banks to consider. A growing political consensus now exists to provide financial incentives to drive a range of infrastructure development, whether factories, data centers, energy projects, residential construction and more. Those types of projects typically have not been bank financed, yet the political backing is creating potentially enormous new markets that are too large to ignore. For example, the market value of clean energy technologies is set to triple to more than $2 trillion by 2035, according to the International Energy Agency’s Energy Technology Perspectives 2024 report.

No matter how executives decide to pursue growth, they'll need to be sure their scenario planning reflects their changing risk profile with leading banks thinking about . For example, deposit cost management will be crucial to profitably responding to fluctuations in loan demand or trading activity caused by changing geopolitical and economic conditions. A lower cost of deposit acquisition certainly helps, but the productivity of relationship managers and branch leaders is equally crucial to controlling deposit costs, according to  of the factors driving efficiency ratios. Scenario planning that helps executives intelligently adjust business line resources in real-time will be a strategic advantage during what is sure to be a busy year.

## Regulatory compliance and deals go hand-in-hand

New Trump-appointed leaders of the Treasury Department, Federal Reserve, OCC, FDIC, CFPB, SEC and CFTC are likely to streamline regulatory requirements, reverse some Biden Administration rulemakings and create a conducive atmosphere for  and the development of innovative financial products and services. Those new leaders may also be more responsive to industry complaints about opaque compliance expectations and enforcement practices.

Even if regulatory requirements are relaxed, however, regulators will continue to use their examination and enforcement powers to maintain financial system safety and soundness and prevent market manipulation, fraud and financial crimes. It’s clear many institutions still have work to do to remediate outstanding issues. The Federal Reserve’s November Supervision and Regulation Report revealed that just a third of large financial institutions had a satisfactory rating across all three components (capital planning and positions; liquidity risk management and positions; and governance and controls).

While the OCC, FDIC and Department of Justice will likely revisit the current administration’s updates to merger review guidelines and streamline the approval process, robust risk management and a clean slate of supervisory findings will be table stakes during a deal’s regulatory review. And while federal climate disclosures and risk management expectations are unlikely to survive under the new administration, state and foreign law, such as in California and Europe, are unlikely to be diluted. Potential acquirers should include climate regulations as part of their transaction due diligence and strategy, especially if they are large, internationally active organizations.

Ultimately, financial institutions can look forward to a brighter regulatory horizon and consider in-organic expansion, but they should not take their feet off the gas when it comes to compliance.

## Data, humans, tech: The AI edge

The adoption of artificial intelligence is accelerating at the largest and most forward-looking banks. Leaders have gone beyond establishing responsible AI governance and principles and are broadening the number of use cases; some now have hundreds of them in process.

In 2025, we anticipate attention will pivot to agentic workflows to drive the next level of operational efficiency, coupled with a more disciplined way of measuring returns on investment. Leading banks are shifting from grassroots experimentation with use cases to a bold, top-down AI strategy, identifying ways to responsibly fast-track risk and compliance reviews, and increase impact. We see three broad areas for banking and capital market clients to achieve this:

### 1. Data as your edge

AI is underscoring the importance of data as a key differentiator, while also bringing to light challenges related to the quality and shareability of data within banking and capital markets firms. Effective AI models need diverse, accurate and large datasets to assess customer risk, prevent financial crimes and develop hyper-personalized products for customer segments. Banks are empowering business and data owners to identify the best use cases by establishing a robust and agile framework for accessing AI tools while maintaining compliance with governance and responsible AI principles.

However, we are seeing data often isn’t clean, collated or organized in a way that can be effectively utilized by multiple business functions. That impairs banks’ ability to surgically automate operations or offer personalized services to help customers manage their finances. Banks should also focus on capturing new types of data to gain a competitive edge by enabling unique and innovative service offerings. While technology already exists to leverage existing data without significant architectural changes, thoughtful approaches will be required to bring down barriers without compromising on information security controls that underpin good identity, access and data management.

“Good” data habits don’t change with AI; however, scale, completeness and accessibility are key to make data “AI ready.” Banks should continue to invest in robust security systems to safeguard sensitive data, enable data accuracy and reinforce governance to manage data assets effectively. Without these safeguards, it’s harder to fully realize the power of AI to enhance end-to-end automation.

### 2. Race for talent

Moving up the value stack also requires skilled professionals such as data engineers, data architects and AI development experts. We are seeing fierce competition among banks for talent, yet the largest banks are winning simply because they’re so large. Besides a bigger total compensation package, larger firms offer intellectually interesting work on leading programs, such as . Mid-sized and smaller banks will need to reassess their value proposition and find their niche to attract top talent. However, it’s not just talent that’s creating a “haves” and “have-nots” in technological prowess. Time is also putting laggards further behind as it can take years to recruit new specialists and train and upskill existing workers to build new computing capabilities.

### 3. The technology imperative

As the banking industry races towards the AI revolution, it’s essential to rethink technology modernization strategies, leveraging first-principle thinking to leapfrog ahead in technology and operational efficiency. Banks should identify legacy platforms that can no longer support the speed and scale to maintain a competitive edge, enable prompt risk and fraud prevention, and meet the changing expectations of customers.

This requires evaluation of the current technology landscape to identify critical bottlenecks in terms of resilience, scalability, interoperability and real-time limitations. Resolving these challenges is critical to building a robust, resilient foundation that supports fast pace of operations and integrates efficiently with advanced AI tools.

Given the pace of change, modernization isn’t about leading the charge, it is about keeping up! Banks can no longer sustain legacy systems alongside modern technology. Banks that harness the power of AI, data, and highly qualified people will transform their operations, elevate customer experiences and achieve stakeholder expectations. Waiting is not an option — bold action is needed to remain in the race.

## Contact us

- **Chris O’Hara**
  - Banking and Capital Markets Advisory Leader, PwC US
  - 
  - ;)

- **Rob Enticott**
  - Banking and Capital Markets Assurance Leader, PwC US
  - 
  - ;)

- **Denise Schwieger**
  - Banking and Capital Markets Tax Sector Champion, PwC US
  - 
  - ;);
```