Banking sector faces strategic reckoning amid geopolitical, technological and competitive shifts in corporate and investment banking

The past two years have delivered unusually strong economics for corporate and investment banking (CIB), but the run of healthy returns masks a sector at an inflection point. According to the original report by McKinsey’s Financial Services Practice, CIB revenues reached $3.0 trillion in 2024 and industry returns on equity averaged north of 13 percent , well above a typical cost of capital. Those figures, and the dominance of lending and cash-management products that underpinned them, set the scene for a strategic reckoning: three structural forces threaten to reshape which players prosper and how banks must operate.

Macroeconomic and geopolitical volatility has become a persistent feature of markets. McKinsey argues that demographic shifts, technological disruption, income distribution changes and a renewed emphasis on national security are producing lasting uncertainty that could slow growth, reprice assets and reconfigure regional trade corridors. The practical implications are wide: banks may need to redesign footprints, reweight balance-sheet exposure across currencies and geographies, and embed geopolitical scenarios into capital and resource allocation. The report recommends a focused “nerve centre” approach to monitor the handful of geopolitical elements most material to each franchise and to take “no-regret” actions , from refreshing working-capital products to enabling frontline staff to hold informed client conversations.

That strategic urgency is being amplified by a new class of attackers that have already begun to seize profitable niches. McKinsey categorises four attacker groups: independent investment banks that have scaled capital-light advisory franchises; non-bank market makers active across cash equities, FX and increasingly in less liquid instruments; private credit firms that now manage roughly $2 trillion of assets and are disintermediating banks in middle-market finance; and FX/payments specialists winning share through price and convenience. Industry data and recent financial-reporting trends lend weight to this picture: major universal banks continue to report resilient trading and fee income through 2025, while management commentary from several large institutions points to both rising markets revenues and continued investment in technology to defend share. For example, Bank of America’s CEO said the bank expects a high single-digit to about 10% increase in markets revenue for the fourth quarter of 2025, while Citigroup’s CFO indicated investment-banking fees could climb by around 25% in the same quarter, reflecting a still-active M&A pipeline. JPMorgan Chase has signalled low-single-digit investment-banking revenue growth and low-teens markets growth for Q4, even as it budgets higher expenses to support expansion and technology investment. Barclays’ reported 2024 results , a 24% rise in pretax profit driven by investment-banking income , illustrate how differentiated execution can lift returns. These contemporaneous developments illustrate both the opportunity for well-positioned banks and the pressure attackers exert on traditional revenue pools.

The third major force is technological: the transition from generative-AI pilots to agentic AI and the rapid maturation of digital assets. McKinsey notes agentic AI , autonomous, multistep agents capable of executing complex workflows , as a potential organisational reset, altering the composition and productivity of banker teams and transforming middle- and back-office processes such as onboarding, surveillance and trade settlement. The report forecasts material change in staffing models and suggests banks should move beyond proofs of concept to “AI at scale,” emphasising adoption, talent and robust regulatory guardrails. At the same time, tokenisation and stablecoins are moving from niche experiments toward meaningful on-chain volumes; McKinsey highlights more than $300 billion of stablecoin circulation and on-chain transaction volumes that surpassed $27 trillion in 2024. The policy and infrastructure backdrop , regulatory initiatives across the EU, UK and Singapore, and US legislative developments noted by market commentators , mean banks must decide whether to issue tokenised deposits, support on-chain settlement or join consortiums. McKinsey counsels standing up a small number of minimum viable value chains tied to existing flow , for example on-chain repo, tokenised money-market funds for corporate treasuries or B2B corridors for same-day settlement , while investing in custody, smart-contract risk controls and board education.

To respond, McKinsey proposes a four-part playbook anchored on strategic agility: (1) respond to immediate uncertainty; (2) build a lean, scalable operating model; (3) capture structural shifts such as private capital; and (4) invest selectively in innovation. The playbook is deliberately pragmatic. Short-term, “no regret” cost and readiness moves can free capital and create resilience; medium-term, a one-bank operating model and improved capital-management practices can tilt income toward scalable, lower-risk businesses; longer-term, targeted bets on private capital, agentic AI and tokenisation can compound advantage.

Operationally, the report urges radical simplification and a private-equity style delivery cadence to drive cost reductions of 20 percent or more on addressable baselines, arguing that top performers can achieve cost-to-income ratios around 50 percent. The “one-bank” agenda , integrating transaction banking, lending and FX across client journeys , is identified as a particularly high-leverage source of revenue, with liquidity relationships that include transaction banking often generating materially higher lifetime revenue. On capital, McKinsey’s sampled review of 30 banks suggests that disciplined risk-weighted asset management can yield 30–70 basis points of ROE improvement through greater capital accuracy and allocation.

On private capital, the report outlines six financing models through which banks can participate even as private credit grows: agency originate-to-distribute, targeted balance-sheet allocation, lender and portfolio finance, forward-flow partnerships, capital solutions and secondary distribution, and dedicated asset-management vehicles. McKinsey cautions that credit-cycle risks and underwriting discipline remain critical as banks decide how much to lean into direct lending versus partnership and distribution models. The broader private-capital opportunity , spanning fund finance, secondaries, GP M&A and portfolio-level services , is large and requires industrialised account planning and tailored operational “swim lanes” if banks are to avoid being disintermediated.

The payoff for disciplined execution can be material. According to McKinsey’s analysis, fully deploying the nine strategic initiatives in the playbook could raise a representative CIB’s profitability by 20–30 percent versus the current baseline, before macroeconomic effects and incremental investment costs. The firm frames this as a thought exercise rather than a universal projection, but the underlying logic is clear: a combination of revenue capture from integrated client franchises, cost takeout from simplified operating models and capital productivity gains can transform a bank’s structural resilience.

That prospect is reflected in how some large banks are behaving. Management statements and results through late 2025 show firms defending markets and advisory franchises while increasing investment spend to modernise infrastructure and support strategic priorities. The tension between near-term revenue capture and longer-term structural investment is visible: several top institutions expect markets and investment-banking revenues to remain robust into the fourth quarter of 2025 even as they plan higher technology and growth-related costs for 2026.

For CIB leaders, the near-term imperative is therefore twofold: protect franchise economics today while moving decisively on the structural plays that reconfigure tomorrow’s sources of fee and capital-efficient income. That means hard choices about cost base, capital deployment, partnerships with attackers where mutually sensible, and where to place high-conviction bets on AI and tokenisation. The winners, McKinsey suggests, will be those that treat geopolitical and technological upheaval not merely as risks to be mitigated but as catalysts to redefine footprint, product mix and operating model , positioning themselves to target structurally higher ROEs while remaining shock-resistant in an era of volatility.