The global banking industry achieved a historic milestone in 2025, posting a record net income of $1.3 trillion, according to a new report by McKinsey & Company.
The figure marks an increase from the previous year’s already record-setting $1.2 trillion, reinforcing banking as one of the most profitable sectors in the global economy.
The findings were published in the 2026 Global Banking Annual Review, released on Thursday, and highlight both strong financial performance and growing structural shifts driven by technology, competition, and changing customer behaviour.
Profit growth continues despite margin pressure
While overall profitability increased, the report noted that net interest margins (NIM) slightly declined globally as interest rates eased in major markets.
Average NIM fell from 1.65% in 2024 to 1.63% in 2025, reflecting tighter lending spreads across the industry.
However, performance varied by region. U.S. banks saw an improvement of 9 basis points, while institutions in Japan and the United Kingdom recorded gains of 7 and 6 basis points respectively.
In contrast, several emerging markets experienced declines, with Brazil’s margins falling sharply from 3.55% to 2.93%.
Balance sheet expansion and capital returns
The report highlighted continued expansion in global banking activity, with deposits, loans, and assets under management rising by 6.5% in 2025, slightly higher than the long-term average growth rate.
Banks also returned significant value to shareholders through dividends and share buybacks, while retaining substantial internal capital buffers.
The sector generated approximately $853 billion in surplus free cash flow to equity, maintaining a multi-year trend of strong capital accumulation.
Fintech and neobanks reshape the industry
A major theme of the report is the accelerating competition from fintech firms and digital-first banks, which are increasingly reshaping financial services globally.
Fintech companies, including neobanks such as Revolut and Nubank, have evolved from niche disruptors into serious competitors.
According to the report, fintechs now account for about 17% of industry revenues, up from 10% in 2021.
This rapid growth signals a shift in customer preference and market structure, with fintechs expanding aggressively into high-value services such as payments, lending, wealth management, and capital markets.
The report noted that several digital players are now profitable and scaling rapidly, with companies like Chime reaching GAAP profitability and Robinhood expanding into broader financial ecosystems.
Technology and AI driving disruption
McKinsey also pointed to emerging technologies as a key force reshaping banking.
The rise of agentic artificial intelligence and digital assets such as stablecoins is enabling customers to access financial services with reduced reliance on traditional banking infrastructure.
These developments, the report suggests, are gradually weakening the traditional bank-customer relationship as third-party platforms increasingly mediate financial interactions.
Changing customer trust dynamics
Another major trend highlighted is shifting consumer behaviour. Customers, particularly younger demographics, are increasingly trusting digital-first financial providers for everyday banking services.
Despite this shift, traditional banks still retain advantages, particularly their physical branch networks and ATM accessibility.
However, the report warns that physical presence alone may no longer be sufficient to maintain long-term customer loyalty.
Industry outlook: competition for the customer relationship
The report concludes that the core competition in global banking is no longer just about infrastructure or transaction processing, but about ownership of the customer relationship.
With fintech firms expanding their product offerings and improving user experience, banks are under increasing pressure to enhance digital capabilities and strengthen customer engagement strategies.
As the industry evolves, McKinsey suggests that the next phase of banking competition will be defined by who controls the most integrated and trusted financial ecosystems.
