- BCG report finds that financial institutions delivered record shareholder returns in 2025; and for the first time in years, more than 80% of global bank equity is trading above book value
- However, financial institutions still rank very low in price-to-earnings multiples. Closing that gap and sustaining value creation will require the industry to revise its approach. Acting from a position of strength, institutions have earned the right to invest boldly in AI, growth, and active portfolio reshaping
- Financial institutions plan to invest 2% of revenue in AI this year. When placed at the center of strategy and deployed at scale, such investment yields significant productivity uplift across banking domains
- Although the threat to disintermediate banks’ customer relationships that AI agents pose has never been stronger, banks have a window to respond with their own agentic propositions to engage customers, leveraging the trust they have earned over decades
- Financial institutions have stronger M&A momentum than any other sector globally. Conditions for portfolio reshaping are the most favorable in over a decade
- The best opportunities for innovation lie at the intersection of three structural forces: AI, nonbank financial institutions, and digital assets
BOSTON—Financial institutions had a banner year in 2025, outperforming every other industry including information technology. In addition, a majority of global bank equity now trades above book value. This recovery is genuine and durable, built on improved profitability, disciplined cost management, and strengthened balance sheets.
Having earned the right to act decisively from a position of strength, institutions now have the opportunity to deal with a persistent issue: price-to-earnings multiples have remained largely unchanged. Sustaining strong returns will require improving multiples, building on outsized growth, and developing a business model that is less reliant on the balance sheet—not merely defending existing profitability.
These are among the findings of Time to Shift Gears? Financial Institutions Have Earned the Right to Be Bolder on Productivity, Growth, and Innovation, a new report from Boston Consulting Group (BCG) released today. Drawing on BCG's proprietary analysis of 1,498 financial institutions globally, the report examines how the sector can build on its strongest performance since the global financial crisis to create durable long-term value.
For the first time in many years, 80% of global bank equity (excluding China) trades above book value, giving institutions the mandate and the financial firepower to act boldly. The report warns, however, that if institutions default to returning capital through buybacks and dividends rather than reinvesting in scalable growth, they risk ceding ground to faster-moving competitors.
"Financial institutions have had an exceptional year, but the market is telling them something important: past performance is not enough," said Saurabh Tripathi, global leader of the Financial Institutions practice at BCG and a coauthor of the report. "The P/E discount reflects genuine investor scepticism about whether banks can deliver sustained, compounding growth. Institutions that act now to redesign their operating models, redeploy capital into growth, and build AI into their strategic core have a real opportunity to close that gap. Those that don't will find that it widens."
The Productivity Paradox and How AI Is Breaking It
Despite years of significant technology investment, operating expenses relative to assets have shown only marginal improvement across most global banking markets, and financial industry headcount has grown at approximately 2% annually over the past three years. Digitization has layered technology onto existing processes rather than fundamentally reimagining them.
AI will change the rules of the game. New players have demonstrated outsized growth on the back of a truly scalable operating model. AI offers every institution the opportunity to get there. The report notes that winners are deploying AI at enterprise scale rather than running isolated AI pilots. Results across credit underwriting, wealth management, engineering, and operations are already material. Financial institutions plan to invest 2% of revenue in AI this year, with only the tech industry spending more. But targeting a genuine operating and business model redesign will be critical.
"The productivity problem in banking is structural, not cyclical, and incremental digitization has not solved it," said Andreas Biffar, a managing director and partner at BCG and a coauthor of the report. "The institutions that are pulling ahead are rebuilding how they operate from the ground up, with AI at the center. The gains are already measurable, and the gap between leaders and laggards is widening faster than was anticipated one or two years ago."
Bold Growth Requires a Clear View of Disruption
For institutions trading above book value, investing and targeting scalable growth is now the primary value lever. AI is expanding the addressable market in ways that were not previously economical, opening new opportunities in wealth management, lending, and other fee-based opportunities. At the same time, disciplined M&A, backed by the strongest conditions for portfolio reshaping in a decade, offers a complementary route to step-change value creation.
As the report warns, realizing these opportunities requires navigating a landscape that is shifting structurally. Nonbank financial institutions continue to strengthen their position across global revenue pools, digital assets are scaling rapidly toward mainstream financial infrastructure, and AI itself is compressing margins even as it enables growth. The institutions best situated to win are those that position themselves at the intersection of these forces, rather than simply defending against them.
Bold Ambition Demands Bold Execution
Capturing this opportunity demands more than strategy. It requires a fundamental redesign of how institutions are structured and run. The report's final chapter sets out what such a redesign looks like in practice: concentrating investment on a small number of high-impact AI bets chosen with rigorous discipline, building five foundational enablers—technology, data, risk and compliance, operating model, and talent—at enterprise scale rather than piecemeal, and ensuring the CEO personally owns the transformation rather than merely sponsoring it. The contours of the intelligent financial institution are already visible in early movers. The window to build toward it is open now, but it will not stay open indefinitely.
Media contact:
Bruce Wraight
wraight.bruce@bcg.com