NEW YORK,January 9,2026 – A potential $170 billion hit to global bank profits looms if institutions fail to adapt to the rise of artificial intelligence,according to new analysis. that’s a 9 percent decline in profit pools-enough to push average returns below the cost of capital.
AI’s Double-Edged Sword for Banking
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The future of banking hinges on how quickly firms embrace-and strategically deploy-new AI technologies.
- Banks urgently need productivity gains, and AI offers a path-but also disruption.
- early adopters of agentic AI could see returns on tangible equity increase by up to four percentage points.
- A shift of just 5 to 10 percent of checking balances to higher-yield accounts, driven by AI agents, could slash industry deposit profits by over 20 percent.
- Success depends on a “precision toolbox” focused on technology, the evolving consumer, capital efficiency, and targeted mergers and acquisitions.
Banks are facing mounting pressure to boost efficiency, and artificial intelligence-specifically machine learning and deep learning-presents a compelling, yet complex, solution. While AI promises significant cost savings, it also carries the risk of fundamentally reshaping the banking landscape, perhaps to the detriment of those who don’t adapt quickly.
What’s the biggest risk for banks right now? The emergence of “agentic AI” – systems capable of autonomous action – could erode traditional profit margins if banks don’t proactively adjust their business models. The stakes are high, with the potential for considerable gains for those who led the charge and significant losses for those who lag behind.
A Precision Approach to AI Implementation
The impact of AI on banking will largely depend on two factors: how effectively banks can leverage agentic technologies to reduce operational costs, and how readily customers embrace AI-powered tools to manage their finances. A strategic “precision toolbox” is crucial, encompassing four key areas:
Technology Focus
Banks should prioritize investments in technologies that demonstrably improve workflows, customer engagement, and overall business models. Scaling back investments that don’t deliver tangible results is equally critically important.
The Evolving Consumer
moving beyond broad customer segmentation to hyper-personalization-treating each customer as a “segment of one”-is essential. Delivering data-driven,tailored products and services will be key to building trust and loyalty in a rapidly changing market.
Capital Efficiency
A shift from large-scale capital reallocations to precise, micro-level balance sheet management-product by product, client by client, and even down to individual risk-weighted assets-can unlock trapped capital and put it to work more effectively.
Targeted Mergers & Acquisitions
Rather than pursuing scale for its own sake,banks should focus on strategic acquisitions that expand reach in specific niche markets or bring specialized capabilities to the table.
The threat from third-party AI agents is real. Even a modest migration of checking balances-just 5 to 10 percent-to higher-yielding options facilitated by these agents could reduce the banking industry’s deposit profits by more than 20 percent.
However, the future isn’t bleak for all. Banks that embrace AI and innovate could see a substantial boost in returns, with some potentially increasing their return on tangible equity by up to four percentage points. Conversely, those who hesitate risk falling behind and facing diminished profitability.
