Four Trends and Three Strategies for Commercial Banking in 2025
The commercial banking sector in 2024 navigated a complex environment, marked by shifting monetary policies, evolving customer expectations, and technological advancements. The 2025 State of Commercial Banking report digs into the proprietary data in Q2 PrecisionLender to get a clear picture of how financial institutions fared in 2024, and it looks at other industry data to pinpoint strategies for success in 2025.
Economic and Rate Environment
The year began with liquidity constraints, emphasizing deposit growth and retention. FIs aggressively attracted deposits, nearly restoring them to pre-crisis levels by year-end. This came at a cost, with a shift from non-interest-bearing (NIB) to interest-bearing (IB) accounts. The Federal Reserve's late 2024 rate cuts reshaped loan pricing, flattening the inverted yield curve. While short-term rates fell, midterm rates rose, impacting fixed-rate funding costs.
Key Trends
Attracting deposits: FIs employed tactics like expanding treasury management to attract low-cost operating accounts and using promotional pricing. Client acquisition became a top priority.
Credit performance: Credit performance surpassed expectations, with modest increases in C&I loan delinquencies and more pronounced but contained challenges in CRE.
Relationship performance: FIs that focused on building a full commercial relationship experienced a much higher return on equity (ROE) than those with credit-only relationships.
Battling fraud: The increasing burden of fraud requires a united, proactive response. Collaboration, AI, and centralized approaches are essential.
Strategies for 2025
Digital transformation: Efficiency and user experience are becoming even more pivotal for midsize and large companies. Offering integration with commercial clients’ enterprise resource planning (ERP) or accounting systems is necessary, but not simple.
SMB opportunities: The underserved small and medium-sized business (SMB) market presents an opportunity for FIs looking to grow deposits. Digital platforms that integrate with fintech solutions, deliver customer interaction, and leverage data for personalized outreach are essential.
Payments modernization: As business customers look to their FIs to help streamline back-end processes and operate more efficiently, instant payments provides an opportunity to meet that need.
For a more in-depth analysis of the commercial banking trends in 2024 and insights for 2025, check out the 2025 State of Commercial Banking report.