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Banking Strategy 2025 and Beyond: Turning Headwinds into Lift
Why Banks Must Rethink Strategy to Achieve “Escape Velocity”
The global banking industry has just posted its best years since before the global financial crisis — $7 billion in revenue and over $1 trillion in net income, with returns on tangible equity (ROTE) reaching 11.7%. Yet, the markets remain skeptical: banking is still valued at a price-to-book of just 0.9, dead last among all industries.
This paradox captures the industry’s dilemma. Investors doubt that recent profitability, fueled largely by higher interest rates is sustainable. If rates normalizes, net interest margins (NIMs) could compress by 50–60 basis points, potentially dragging ROTE back toward cost of equity. To break free from this “gravity,” banks need a strategy that blends structural bets (where to compete) with relentless execution (how to win).
The Five Strategic Imperatives for Banks
1. Rebalance Revenue Mix
Future-proof banks cannot rely solely on rate-driven NIM. Instead, they must tilt their portfolios toward capital-light, fee-driven business such as payments, wealth management and advisory services. Winners already generate 40% or more of revenues from fees, reducing dependency…
