Major Banks

The Major Banks industry is a critical backbone of the global economy, facilitating capital flow, managing financial transactions, and ensuring the stability of the financial system. These institutions primarily engage in deposit-taking, lending, and a wide array of financial services. Their business models are fundamentally driven by net interest income and non-interest income.

The Major Banks industry's performance is influenced by economic indicators, consumer behavior shifts, technological advancements, and regulatory changes. Key economic indicators include interest rates, inflation, GDP growth, and unemployment rates, all of which directly impact banks' profitability and lending activities. Consumer behavior is increasingly shifting towards digital banking, with a growing preference for online and mobile services. Technological developments, particularly in AI, cloud computing, and automation, are driving efficiency in banking operations, enhancing customer experiences, and improving risk management. Regulatory changes aim to ensure bank solvency and resilience against various risks, with an increasing focus on data security, privacy, cybersecurity, and ESG factors.

The Major Banks industry includes large, diversified institutions and smaller, specialized players. Competition drives banks to offer better services. Major global banks compete on scale, while smaller institutions compete by offering diverse service propositions and focusing on customer service. Fintech firms and non-bank entities are increasingly challenging traditional banks.

The banking industry has demonstrated resilience, with strong results in 2024, supported by a focus on profitability and low loan losses. Looking forward to 2025, the outlook suggests continued stability in profitability, though the underlying drivers are expected to shift. Economic growth is projected to decelerate, and interest rates are expected to drop meaningfully. Credit quality is projected to normalize, and geopolitical and macroeconomic uncertainties are expected to persist. Banks are also expected to increase IT spending in 2025.

Investors in the Major Banks industry face economic sensitivity, regulatory exposure, commodity price volatility and geopolitical factors. Economic slowdowns, persistent inflation, and high interest rates can dampen growth. Banks need to navigate complex and evolving compliance requirements. Geopolitical events can influence market sentiment and macroeconomic stability. Cybersecurity, credit, operational, market, and liquidity risks are also significant.