EY Outlook on Global Banking Industry Trends in 2026

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I. Global Banking Industry Expected to Maintain Steady Growth in 2026

The global banking industry showed strong resilience in 2025, with the annual return on equity (ROE) expected to reach 12.8%[1], an increase of 0.7 percentage points from 2024, and is projected to rise further to 13.0% in 2026, continuing to maintain robust profitability.

The following four core factors support the stable performance of the global banking industry in 2026:

**1.**Steady Growth in Net Interest Income

Thanks to nearly 10% loan growth and continuous optimization of asset structure, global banking industry net interest income is expected to grow by over 5% in 2025, with growth projected to exceed 7% in 2026.

Figure 1: Despite declining interest rates, banks in all regions are expected to achieve steady growth in net interest income.

Source: S&P Capital IQ, EY Insights Analysis.

Note: Data from each region represents the average net interest income of banks in that region.

**2.**Structural Benefits for Fee Income

The banking industry’s fee income is expected to grow strongly in 2025, with growth projected to exceed 8% in 2026. Core driving factors include:

(1) Amid market volatility, clients are actively adjusting trading strategies, leading to a significant increase in trading income;

(2) The momentum for growth in investment banking revenue continues due to restored market confidence, resumption of corporate mergers and acquisitions, and expedited regulatory approvals;

(3) Strong stock market performance drives rapid growth in wealth management income.

**3.**Stable Improvement in Credit Quality

In 2025, the market expressed widespread concern that U.S. tariff policies might trigger a chain reaction, negatively impacting banks’ corporate clients; fortunately, most related risks have not materialized. The banking industry’s credit quality is expected to remain stable in 2026, with risk exposure to non-bank institutions still a focus for investors and regulators, and the average loan provision ratio for banks expected to remain roughly flat with current levels.

**4.**Continuous Advancement of Industry Innovation

Emerging technologies such as agent-based artificial intelligence, advanced analytics tools, and digital asset infrastructure are gradually shifting from optional to key elements determining banks’ future competitiveness. With ongoing increases in technological investment, industry operating costs are expected to rise, with growth anticipated to exceed 7% in 2026. At the same time, investors are increasingly focused on how banks can maximize investment returns. To achieve this, banks need to continue to improve efficiency, enhance potential, optimize processes, build a talent pool that supports AI operational models, and clearly demonstrate investment return effectiveness to the market.

II. Building Competitive Advantages to Create Sustainable Value

Despite strong revenue growth trends in the global banking industry, valuations are about 60% discounted compared to the overall market level. This phenomenon may reflect investors’ doubts about whether banks can maintain resilience and achieve stable, sustainable revenue growth.

Figure 2: The banking industry shows the most significant valuation discount in interest income.

Source: S&P Capital IQ, EY Insights Analysis.

Note: The data in the figure is based on the top 100 companies by market capitalization in each industry.

EY analysis[2] indicates that while 55% of the banks’ return on equity is influenced by external structural “beta” factors such as monetary policy and market cycles, the remaining 45%, or “alpha,” is shaped by management decisions, execution efficiency, and operational excellence. To enhance “alpha,” continuous efforts are needed in the following two areas.

**1.**Simplifying Strategy, Structure, and Operations

Strategically, banks need to redefine their competitive advantages and approaches, focus on high-value customer segments, and tilt asset allocation toward high-growth markets while streamlining underperforming products.

Structurally, banks need to reshape their organizational structure, operational models, and business layouts. Specific measures include simplifying legal entity structures, optimizing team structures and geographic distribution, and upgrading global capability centers into excellence centers that integrate innovation, analytics, and digital delivery. In areas that are difficult to optimize internally, banks can explore outsourcing, leveraging third parties for better, faster, and more cost-effective service delivery. Meanwhile, banks should also optimize their technology architecture to effectively reduce system complexity, enhance scalability, and seek partnerships with fintech companies and tech giants.

Operationally, banks must strive to embed sustainable productivity-enhancing mechanisms through intelligent automation, process digitization, and workforce transformation. Investments in artificial intelligence are reshaping the boundaries of banks’ productivity potential, breaking through traditional back-office functions to extend into core areas such as compliance management, credit assessment, client outreach, and account opening.

**2.**Maintaining Growth to Create Sustainable Value

Although simplification transformations help safeguard banks’ profitability, true valuation enhancement still relies on sustainable growth momentum. EY analysis shows that leading banks are adopting smart growth strategies, expanding their presence in key areas, and scaling mature models, focusing on three major fields:

Strategically, reshaping business models by integrating banking services into customers’ life scenarios through collaborative platforms, deepening customer relationships, and unlocking new growth opportunities, such as sustainable finance. At the same time, diversifying income through wealth management, payment settlements, insurance consulting, and other services to enhance shareholder returns.

Structurally, leveraging digital platforms and data capabilities to expand service boundaries, achieving differentiation in pricing and dynamic personalized service recommendations, opening up new profit growth points. For example, application programming interfaces (APIs) and the “open banking” model are gradually expanding the reach of banking services, while next-generation payment systems and digital wallets are continuously increasing transaction volumes and deepening customer engagement.

Operationally, effectively improving customer retention and engagement through customer segmentation, AI-enabled customer experiences, and financial health platform applications. The underlying support system for such initiatives includes a robust data management framework, an integrated performance assessment mechanism, and an agile delivery model.

For the above initiatives, numerous examples can serve as references. For instance, some banks have launched lifestyle-centric super apps, some institutions have upgraded pricing engines using behavioral and relationship data, and some have successfully enhanced customer loyalty through financial health platforms.

As banks systematically apply these growth levers, their data-driven and light-capital business models are accelerating integration, helping diversify income and enhance customer stickiness. When growth continues to translate into stronger profitability, it will also support the enhancement of bank valuations.

III. Putting into Practice and Clearly Communicating

The future profitability of banks will depend on their ability to proactively transform. Streamlined structures and profit growth are no longer mutually exclusive but are complementary. Banks that excel in both will be better positioned to consistently achieve substantial returns and restore investor confidence.

Maintaining effective communication with investors is crucial. Banks that can clearly articulate their strategies, set measurable goals, and continuously report progress often build stronger market confidence.

In the current market environment, investor sentiment has become a core catalyst for enhancing bank valuations. Therefore, transparent communication and proactive interaction will be key to translating solid fundamentals into long-term market recognition.

Author Team:

Xin Yi

Chief Partner of Financial Services for EY Greater China

Chief Partner of Financial Technology and Innovation for EY Asia-Pacific

effie.xin@cn.ey.com

Xu Xuming

Partner in Charge of High-Growth Markets, Financial Services for Greater China

EY Huaming Certified Public Accountants (Special General Partnership)

steven.xu@cn.ey.com

Zhang Chao

Partner in Charge of China Consulting, Financial Services for Greater China

EY (China) Corporate Consulting Co., Ltd.

jason-c.zhang@cn.ey.com

Gu Jun

Partner in Charge of Banking and Capital Markets, Financial Services for Greater China

EY Huaming Certified Public Accountants (Special General Partnership)

lorraine.gu@cn.ey.com

Note:

[1]. This data represents a simple arithmetic average of the return on equity of 100 large global banks. Other data points are calculated using the same method, using market consensus forecast values as of December 8, 2025, unless otherwise specified.

[2]. This analysis uses EY’s proprietary regression analysis framework to explore the true drivers of banking profitability. The model is based on over 30,000 data points from 100 large global banks, covering a complete 13-year cycle from 2012 to 2024. By studying bank performance across multiple economic and interest rate cycles, this analysis clarifies how management decisions and market forces jointly determine bank return levels.

This article is written for general informational purposes and is not intended to serve as reliable accounting, tax, legal, or other professional advice. Please consult your advisor for specific advice.

(This article is from Yicai Global)