Will global bank profits usher in a cyclical recovery? Interpretation of US and European banking data

   In 2025, the global economy will move forward in a slow growth and differentiated recovery. Geopolitical conflicts, monetary policy shifts and the wave of financial technology will interweave, bringing complex variables to the recovery of global banking profits.

Driven by the growth of non-interest income and the acceleration of mergers and acquisitions, the profit growth rate of the US banking industry has rebounded significantly; the eurozone banking industry has shown a steady recovery trend based on the growth of net interest income and the improvement of capital adequacy ratio.

Based on the latest data and industry dynamics, this article deeply analyzes the driving force, challenges and future trends of the profit recovery of the US and European banking industries.

1. US banking industry: the "non-interest income engine" of profit recovery

(I) Profit growth and optimization of income structure

In the first quarter of 2025, the profits of the US banking industry increased by 5.8% year-on-year to US$70.6 billion, a record high in the past three years.

This growth is mainly due to the strong performance of non-interest income: investment banking fee income increased by 13% year-on-year, and asset management, wealth management and payment businesses contributed significantly.

For example, JPMorgan Chase's trading revenue in the fourth quarter of 2024 hit a record high for the same period, and Goldman Sachs and Morgan Stanley's investment banking net profit doubled. The proportion of non-interest income increased from 38% in 2023 to 42% in 2025, becoming the core driver of profit recovery.

In terms of interest income, although the loan growth rate slowed down (the annual growth rate in the first quarter of 2025 was only 3%), the net interest margin (NIM) remained stable during the interest rate cut cycle.

This is due to the banks' active adjustment of asset allocation: on the one hand, increasing the proportion of high-yield loans, such as industrial and commercial loans and consumer credit; on the other hand, optimizing the liability structure and reducing deposit costs through digital tools.

For example, Bank of America reduced operating costs by 40% through the AI ​​customer service system, while improving customer retention rate.

(II) Asset quality and risk control

Despite the weak performance of commercial real estate investment portfolios and a year-on-year increase of 9.1% in loan loss reserves, the overall asset quality of the US banking industry is controllable.

In the first quarter of 2025, the non-performing loan ratio remained at around 0.95%, lower than 0.86% in 2023. This is due to the bank's real-time monitoring of credit quality: analyzing customer behavior through big data and dynamically adjusting risk exposure in combination with macroeconomic indicators.

For example, Wells Fargo uses machine learning models to predict credit card default rates and make provisions in advance.

Changes in the regulatory environment have also strengthened risk management. In 2025, the Federal Reserve relaxed some capital regulatory requirements, but required banks to strengthen the disclosure of climate risks and fintech risks.

For example, Citigroup needs to disclose 200 ESG indicators by the end of 2025, and data collection costs will increase by 30%. This has prompted banks to increase their investment in technology and improve compliance efficiency.

(III) Technological transformation and mergers and acquisitions

Fintech has become another key variable in the recovery of US banking profits. In 2025, the banking industry's technology investment reached US$176 billion, of which 60% was used for business transformation.

For example, JPMorgan Chase launched an AI-driven wealth management platform, with a 25% increase in customer asset size; PayPal optimized cross-border payments through blockchain technology, with a 40% increase in transaction volume.

Mergers and acquisitions have accelerated the concentration of the industry. In the first quarter of 2025, the transaction volume of mergers and acquisitions in the US banking industry increased by 20% year-on-year, and large banks expanded their market share by acquiring regional banks.

For example, U.S. Bancorp acquired MUFG Union Bank, adding more than $120 billion in customer assets. Mergers and acquisitions not only bring economies of scale, but also promote business synergies: such as integrating investment banking and wealth management businesses to improve cross-selling efficiency.

2. Eurozone banking industry: a steady recovery driven by net interest income

(I) Net interest income growth and capital adequacy ratio improvement

The eurozone banking industry showed stronger profitability resilience in 2025. In 2024, the net interest income of eurozone banks increased by 8% year-on-year, and the capital adequacy ratio increased to 15.2%, far higher than the EU regulatory requirement of 11.4%.

This is due to the lag effect of the interest rate hike cycle: although the European Central Bank began to cut interest rates in 2025, the repricing of loans in the previous high interest rate environment still drove the growth of net interest income.

Improved loan quality is another supporting factor. In the first quarter of 2025, the non-performing loan ratio of eurozone banks fell to 1.8%, the lowest level since 2008. The non-performing loan ratio of banks in core countries such as Germany and France is even lower than 1.5%.

This is due to economic recovery and banks' active disposal of non-performing assets: for example, Spain's Santander Bank has accelerated the recovery of non-performing loans through digital platforms, and the recovery rate has increased to 65%.

(II) Digital transformation and cross-border business expansion

Eurozone banks have increased their investment in technology to promote digital transformation. In 2025, digital technology spending in the European banking industry will account for 35%, higher than the 30% in the United States.

For example, ING Bank of the Netherlands transformed its customer service center into an intelligent delivery center, shortening customer response time by 50%; BNP Paribas launched an AI-driven anti-fraud system, reducing fraud losses by 40%.

Cross-border business has become a new growth point. In the first quarter of 2025, cross-border loans of eurozone banks increased by 6% year-on-year, mainly in Central and Eastern Europe and the Asia-Pacific region. For example, Deutsche Bank has used digital platforms to serve the "Belt and Road" project, with new cross-border business income exceeding 2 billion euros.

Cross-border business not only disperses risks, but also increases the proportion of intermediary business income.

(III) Geopolitical and regulatory challenges

Geopolitical risks remain a challenge facing the eurozone banking industry. The conflict between Russia and Ukraine has led to energy price fluctuations, pushing up credit risks in some Eastern European countries.

In 2025, the European Central Bank required banks to increase provisions for high-risk countries, resulting in a decline in the capital adequacy ratio of some banks. For example, Austria's First Savings Bank's loan loss provisions in Russia increased by 50%.

Regulatory fragmentation has increased compliance costs. The new EU regulations require banks to disclose 200 ESG indicators, and data collection costs have soared by 30%.

In addition, the United States postponed the implementation of Basel III, resulting in the need for eurozone banks to adjust their compliance strategies in more than 40 jurisdictions simultaneously. For example, Italy's UniCredit Bank needs to complete the upgrade of its global compliance system by the end of 2025, investing more than 500 million euros.

3. Commonalities and differences in the recovery of profits in the US and European banks

(I) Commonality: non-interest income and technology-driven

The common driving force behind the recovery of profits in the US and European banks lies in the growth of non-interest income and technological transformation. In 2025, the proportion of non-interest income in the US banking industry will reach 42%, and that in the eurozone will be 38%; the proportion of technology investment will be 30% and 35% respectively.

For example, JPMorgan Chase and BNP Paribas have both improved wealth management efficiency through AI platforms, and the scale of customer assets has increased by more than 20%.

(II) Differences: Monetary Policy and Risk Preference

The US banking industry relies more on mergers and acquisitions and high-yield asset allocation, while Eurozone banks rely on net interest income and cross-border business.

In 2025, the transaction volume of M&A in the US banking industry will increase by 20% year-on-year, while that in the Eurozone will be 10%; the proportion of cross-border loans of Eurozone banks will reach 25%, higher than the 15% in the United States.

This reflects the different risk preferences of the two: US banks are more inclined to improve profits through scale effects, while Eurozone banks are more focused on risk diversification.

4. Future Challenges and Trends

(I) Challenges: Low Interest Rate Environment and Geopolitical Risks

In 2025, the global central bank's interest rate cut cycle will continue, and the United States and the Eurozone are expected to cut interest rates by 70 basis points throughout the year. This will compress the net interest margin and force banks to further optimize their asset-liability structure.

For example, US banks need to increase the proportion of high-yield loans to 40%, and Eurozone banks need to accelerate the layout of cross-border business.

Geopolitical risks increase uncertainty. The conflict between Russia and Ukraine and the tense situation in the Middle East may lead to energy price fluctuations and push up credit risks. In 2025, the European Central Bank requires banks to increase provisions for high-risk countries, and some banks are facing pressure on capital adequacy ratios.

(II) Trend: Green Finance and Digital Services

Green finance has become a new growth point. In 2025, global banks have pledged to invest $11.2 trillion in sustainable finance, and the annual investment gap in the clean energy field has reached $2.7 trillion.

For example, Citigroup plans to increase the proportion of green loans to 20% by the end of 2025, and Wells Fargo has launched a carbon footprint tracking tool to serve corporate customers.

Digital services deepen customer experience. In 2025, the number of mobile payment users of global banks will exceed 3 billion, and the coverage rate of AI customer service will reach 60%.

For example, JPMorgan Chase launched a "digital wealth advisor" to improve customer asset allocation efficiency by 30%; Spain's Santander Bank optimized supply chain finance through blockchain technology and shortened transaction time by 70%.

In 2025, the profit recovery of the US and European banking industries is the combined effect of optimizing income structure, accelerating technological transformation and strengthening risk management.

The US banking industry has achieved growth through non-interest income and mergers and acquisitions, while Eurozone banks have remained robust with net interest income and cross-border business.

However, the low interest rate environment, geopolitical risks and regulatory fragmentation still pose challenges. In the future, green finance and digital services will become the core direction of industry change.

Banks need to find a balance between profit growth and risk control, and achieve sustainable development through technological innovation and business model upgrades. This cyclical recovery is not only a rebound in profits, but also the starting point for structural changes in the banking industry.