Banks post record $1.2t profit in 2024: McKinsey

If banks fail to adapt AI, global profit pools could fall by about $170b.

Global banks earned record profits of about $1.2t in 2024 — the highest ever for any industry — but investors remain cautious, according to McKinsey’s Global Banking Annual Review. 

Market valuations are nearly 70% lower than the average across other sectors, reflecting doubts that recent gains can be sustained. 

McKinsey say profits were boosted by temporary tailwinds, whilst challenges such as falling interest rates, evolving consumer behaviour, and competition from fintechs, private credit, and wealth managers are squeezing margins.

These pressures could push banks’ return on equity below their cost of capital in several markets. 

The report also said that banks can no longer rely on broad, scale-driven strategies and must instead focus on precision.

Artificial intelligence is seen as a key driver of this shift. 

Early adopters of generative and agentic AI could achieve lasting advantages, with potential cost savings of 15% to 20% across the industry, even after accounting for higher technology expenses. 

However, as competition intensifies, much of the benefit is expected to flow to customers through lower prices and improved services.

AI could also erode banks’ long-term profitability as consumers increasingly use intelligent agents to manage their finances, potentially reducing deposits and credit card revenues. 

If banks fail to adapt, global profit pools could fall by about $170b, or 9%, over the next decade.