Why 2025 Could Be a Great Year for Big Banks

Top global banks have taken off in recent years, but ascents can be bumpy. In 2025, they might get to relax while on cruise speed.

The Federal Reserve recently signaled that interest rates might only be cut twice in the year ahead as a result of stickier-than-expected inflation, prompting stocks generally to sell off. But rates being “less high for longer” is actually great news for banks, and the latest sign that 2025 might be a good year for almost all of the many business lines that comprise large universal lenders.

This hasn’t been the case in recent times, even when financial firms overall were doing really well. In 2022, the big rebound in global trade that followed production stoppages during the depths of the pandemic resulted in a surge in sales for such transaction-focused intermediaries as Citigroup , HSBC Holdings and BNP Paribas . Desks that trade fixed income, currencies and commodities, or FICC, saw client flows balloon, as Russia’s full-scale invasion of Ukraine and the start of the rate-tightening cycle sparked a sudden demand to hedge rates, foreign exchange and energy prices around the world. The likes of JPMorgan Chase and Deutsche Bank benefited greatly.

But adverse monetary and geoeconomic conditions caused underwriting fees to collapse, as companies all simultaneously held off on issuing equity and debt.

Then came 2023. Large-bank revenue jumped once again, this time mostly driven by an 11% increase in net interest margins, Visible Alpha data shows. After a decade and a half, the industry was finally getting to benefit from a larger spread between what it was able to charge borrowers and pay to depositors. Yet, at the same time, dealmaking tumbled because of high borrowing costs and heightened economic and geopolitical uncertainty.

Some of the lopsidedness has persisted this past year, mostly because central banks have lowered rates again. That resulted in a fall in net interest income that has hit revenue in commercial and wealth-management arms, but also transaction banking, which does a lot of cash management for firms. Traders of government bonds and other rate-related products have had a tepid year. And, overall, revenue growth has slowed.

Nevertheless, 2024 is when the market truly rewarded bank stocks. The banking subcomponents of the S&P 500 and the Stoxx Europe 600 have returned 35% and 32%, respectively, compared with 25% and 6% for the broader indexes.

This underscores the importance that today’s investors attribute to getting predictable, well-diversified returns from their banks, rather than having another year with a quarter of revenue coming from FICC.

Indeed, this past year was still one of normalization. Mergers and initial public offerings bounced back a bit, and many corporate treasurers had to refinance their debt to avoid an incoming wall of bond maturities. And, even if investors eschewed government debt, they gobbled up the kinds of fixed-income products that offered a spread over it, such as corporate bonds, in an attempt to lock in high yields for the long run.

This is a good omen for the year ahead.

For the first time since 2021, all of the divisions of the world’s top banks except FICC trading are forecast to expand revenue, according to a median of analyst estimates compiled by Visible Alpha. Even that dark spot might end up brightening: As of early December, yields on three-month Treasury bills have been trading below those of 10-year paper for the first time since 2022, which might soon trigger renewed enthusiasm for fixed income.

Regardless, steeper yield curves will almost certainly be good for banks, serving to widen net interest margins.

To be sure, officials easing borrowing costs by less than previously expected could hit consumers and cause trouble for some commercial real-estate loans. The European economy in particular is quite weak. Still, the impact is likely to be small. Default rates remain low.

Crucially, 2025 looks likely to be the year in which the advisory business gathers momentum after a tentative comeback. Private-equity firms are being pressured to start exiting their investments after years of waiting it out. While sponsors have been coming up with new delaying tactics, such as rolling over assets into “continuation funds,” the management-consulting firm Bain estimated that 46% of companies owned by private-equity funds were held for four years or longer by the end of 2023, which was the highest level since 2012.

If, on top of this, the Trump administration eases regulatory scrutiny both on the financial sector and on mergers, banks will enjoy yet another tailwind , with Goldman Sachs probably coming out on top.

Banks might finally be firing on all cylinders.

The hottest crypto trade has turned cold. Some investors are saying “told you so,” while others are doubling down.

It was the move to make for much of the year: Sell shares or borrow money, then plough the cash into bitcoin, ether and other cryptocurrencies. Investors bid up shares of these “crypto-treasury” companies, seeing them as a way to turbocharge wagers on the volatile crypto market.

Michael Saylor pioneered the move in 2020 when he transformed a tiny software company, then called MicroStrategy , into a bitcoin whale now known as Strategy. But with bitcoin and ether prices now tumbling, so are shares in Strategy and its copycats. Strategy was worth around $128 billion at its peak in July; it is now worth about $70 billion.

The selloff is hitting big-name investors, including Peter Thiel, the famed venture capitalist who has backed multiple crypto-treasury companies, as well as individuals who followed evangelists into these stocks.

Saylor, for his part, has remained characteristically bullish, taking to social media to declare that bitcoin is on sale. Sceptics have been anticipating the pullback, given that crypto treasuries often trade at a premium to the underlying value of the tokens they hold.

“The whole concept makes no sense to me. You are just paying $2 for a one-dollar bill,” said Brent Donnelly, president of Spectra Markets. “Eventually those premiums will compress.”

When they first appeared, crypto-treasury companies also gave institutional investors who previously couldn’t easily access crypto a way to invest. Crypto exchange-traded funds that became available over the past two years now offer the same solution.

BitMine Immersion Technologies , a big ether-treasury company backed by Thiel and run by veteran Wall Street strategist Tom Lee , is down more than 30% over the past month.

ETHZilla , which transformed itself from a biotech company to an ether treasury and counts Thiel as an investor, is down 23% in a month.

Crypto prices rallied for much of the year, driven by the crypto-friendly Trump administration. The frenzy around crypto treasuries further boosted token prices. But the bullish run abruptly ended on Oct. 10, when President Trump’s surprise tariff announcement against China triggered a selloff.

A record-long government shutdown and uncertainty surrounding Federal Reserve monetary policy also have weighed on prices.

Bitcoin prices have fallen 15% in the past month. Strategy is off 26% over that same period, while Matthew Tuttle’s related ETF—MSTU—which aims for a return that is twice that of Strategy, has fallen 50%.

“Digital asset treasury companies are basically leveraged crypto assets, so when crypto falls, they will fall more,” Tuttle said. “Bitcoin has shown that it’s not going anywhere and that you get rewarded for buying the dips.”

At least one big-name investor is adjusting his portfolio after the tumble of these shares. Jim Chanos , who closed his hedge funds in 2023 but still trades his own money and advises clients, had been shorting Strategy and buying bitcoin, arguing that it made little sense for investors to pay up for Saylor’s company when they can buy bitcoin on their own. On Friday, he told clients it was time to unwind that trade.

Crypto-treasury stocks remain overpriced, he said in an interview on Sunday, partly because their shares retain a higher value than the crypto these companies hold, but the levels are no longer exorbitant. “The thesis has largely played out,” he wrote to clients.

Many of the companies that raised cash to buy cryptocurrencies are unlikely to face short-term crises as long as their crypto holdings retain value. Some have raised so much money that they are still sitting on a lot of cash they can use to buy crypto at lower prices or even acquire rivals.

But companies facing losses will find it challenging to sell new shares to buy more cryptocurrencies, analysts say, potentially putting pressure on crypto prices while raising questions about the business models of these companies.

“A lot of them are stuck,” said Matt Cole, the chief executive officer of Strive, a bitcoin-treasury company. Strive raised money earlier this year to buy bitcoin at an average price more than 10% above its current level.

Strive’s shares have tumbled 28% in the past month. He said Strive is well-positioned to “ride out the volatility” because it recently raised money with preferred shares instead of debt.

Cole Grinde, a 29-year-old investor in Seattle, purchased about $100,000 worth of BitMine at about $45 a share when it started stockpiling ether earlier this year. He has lost about $10,000 on the investment so far.

Nonetheless, Grinde, a beverage-industry salesman, says he’s increasing his stake. He sells BitMine options to help offset losses. He attributes his conviction in the company to the growing popularity of the Ethereum blockchain—the network that issues the ether token—and Lee’s influence.

“I think his network and his pizzazz have helped the stock skyrocket since he took over,” he said of Lee, who spent 15 years at JPMorgan Chase, is a managing partner at Fundstrat Global Advisors and a frequent business-television commentator.

Why 2025 Could Be a Great Year for Big Banks

After a few bumpy years of both successes and setbacks, lenders might finally be firing on all cylinders

Selloff in bitcoin and other digital tokens hits crypto-treasury companies.