Insights from the 2025 RBC Financial Institutions Conference

"Confidence is contagious. So is lack of confidence." - Vince Lombardi

As we step into 2025, the financial sector finds itself at a pivotal moment. The past year brought stronger-than-expected bank earnings, a moderating regulatory environment, and an economy that defied recessionary fears. Yet, as Vince Lombardi’s words remind us, sentiment plays a crucial role in shaping outcomes—both in markets and in business strategy. While confidence in the banking sector has been building, supported by a higher-for-longer interest rate environment and resilient economic growth, uncertainty remains in key areas such as capital markets activity, regulatory adjustments, and the competitive pressures of emerging technologies.

At the center of these industry discussions was the 2025 RBC Financial Institutions Conference, the largest financial institutions event in the industry. With record attendance from both investors and corporates, this year’s conference reinforced RBC’s position as a premier platform for thought leadership and market insights. The conversations at the event reflected the evolving landscape—where banks are shifting from defense to offense in capital deployment, navigating regulatory changes, and adapting to the intensifying competition from private credit and technology-driven disruptors.

Gerard Cassidy, Global Co-Head of Financials Research and Head of U.S. Bank Strategy at RBC Capital Markets, has been at the forefront of analyzing these shifts. In the September 2024 edition of Capital Gains, Why U.S. Banks Are Primed for a Rebound, Gerard highlighted the conditions that could drive bank outperformance—ranging from a stabilizing economy and shifting Federal Reserve policy to renewed M&A activity and regulatory shifts. Now, as we assess the industry in 2025, many of those predictions have materialized, while others have evolved in ways few could have anticipated.

The Punchline: Top Five Takeaways from the 2025 RBC Financial Institutions Conference

💡 1.  Banks Are Moving from Defense to Offense

With a stronger-than-expected economic backdrop and moderating regulatory pressures, banks are shifting toward capital deployment, loan growth, and strategic M&A, rather than the defensive postures of prior years.

💡 2.  Private Credit and Traditional Banks Are Converging

Alternative lenders continue to expand, but banks are reasserting themselves in key lending segments, regaining market share in structured finance and middle-market deals. The public-private market convergence is reshaping capital markets.

💡 3.  AI and Technology Are Reshaping Financial Services

AI is driving efficiency, risk management, and investment strategies, but high costs remain a barrier for smaller firms. The next wave of AI adoption will focus on customer engagement, automation, and operational efficiencies.

💡 4.  Regulatory and Trade Uncertainty Remains a Challenge

Policy shifts—ranging from tariffs to Basel III revisions—are creating both headwinds and opportunities. While banks are benefiting from a more flexible regulatory outlook, ongoing trade uncertainty is delaying corporate decision-making and capital investments.

💡 5.  Long-Term Thinking Will Define the Winners

Despite near-term challenges, industry leaders remain optimistic. Those who stay focused on long-term growth, embrace innovation, and maintain a disciplined approach to capital allocation will be best positioned to succeed in an evolving financial landscape.

Market and Economic Backdrop

As we entered 2025, the economic landscape remained complex, shaped by macro trends, regulatory shifts, and geopolitical uncertainty. While the U.S. economy continued to show resilience with moderate GDP growth and a robust labor market, new risks have emerged that are influencing financial institutions’ strategies.

Trade and Regulatory Uncertainty

The conference took place just as the administration imposed new tariffs on Canada, Mexico, and China, disrupting markets and adding uncertainty to global capital flows and corporate investment. The policy volatility is already pressuring businesses, with higher import costs, declining consumer confidence, and rising inflation expectations.

Regulatory shifts are also in focus. The Basel III Endgame proposal, which initially called for significant capital increases on large banks, is being reconsidered, potentially easing constraints on lending and M&A activity.

Higher-for-Longer Interest Rates

While inflation has moderated, risks remain. Gerard cautioned that a reacceleration of inflation could force the Fed back into tightening, impacting bank profitability. For now, banks are benefiting from a steep yield curve, enabling them to reprice loans at higher rates while maintaining stable deposit costs.

Credit and Capital Markets Outlook

Loan growth, which stalled in early 2024, has started to rebound, particularly in commercial and industrial lending. Corporate balance sheets remain healthy, but uncertainty around inflation and trade policy is delaying M&A and large-scale capital commitments.

Despite early 2025 market volatility, investment banking pipelines are growing. Gerard noted that with regulatory clarity improving and rate cuts anticipated, M&A and IPO activity should strengthen in the second half of the year.

Positioning for the Future

Financial institutions are navigating a transitionary period, balancing capital strength, regulatory shifts, and geopolitical risks. While uncertainty remains high, banks are well-capitalized and positioned to adapt, leveraging liquidity and risk management expertise to manage evolving challenge.

2025 RBC Financial Institutions Conference: A Benchmark for the Industry 

The 2025 RBC Financial Institutions Conference once again proved to be the largest and most influential gathering in the industry, with record-breaking attendance from corporate executives and investors. This year’s conference saw a 21% increase in YoY investors and 6% increase in YoY companies, reflecting the growing demand for insights into the financial sector’s evolving landscape.

As the premier event of its kind, the conference set the tone for the year ahead, offering deep insights into the financial sector’s most pressing challenges and opportunities. Given the rapid shifts in regulatory policy, interest rate expectations, implementation of tariffs and economic trends, this year’s conference took on heightened significance, offering clarity on how financial institutions are navigating today’s complex environment.

Key discussion topics this year included:

• The impact of regulatory changes on bank capital and M&A activity;

• Loan growth expectations given a higher-for-longer rate environment;

• The competitive dynamic between banks and private credit;

• The expectations for government policies such as the implementation of tariffs and the potential impact on the economy; and

• The role of AI and technology in shaping the next decade of banking.

The discussions at this conference will set the tone for the industry’s strategic direction, as banks and investors evaluate how to position themselves in this shifting landscape.

Key Takeaways from Industry Leaders at the 2025 RBC Financial Institutions Conference

At this year’s conference, industry leaders across banking, asset management, and private markets addressed the forces shaping the financial sector, from macroeconomic uncertainty to technological disruption and the evolution of capital markets. Their insights provided a roadmap for navigating an increasingly complex environment.

Trade Policy and Market Volatility

The impact of shifting trade policies was a dominant theme, with business leaders highlighting the uncertainty caused by tariffs and isolationist policies. These changes have led to corporate hesitation around M&A, capital investment, and supply chain restructuring, as companies struggle to make long-term decisions in an unpredictable regulatory environment. Rising inflation concerns were also top of mind, with some warning that labor shortages, supply chain disruptions, and geopolitical tensions could keep inflation elevated longer than expected.

The Role of AI and Technology

Executives across industries emphasized that AI is reshaping financial services, improving efficiency, and transforming investment strategies. While AI has the potential to lower costs and drive productivity, its high implementation costs remain a barrier for smaller firms. Leaders noted that large institutions are leveraging AI for risk management, fraud detection, and trading strategies, while the next wave of AI adoption will focus on customer engagement and operational efficiency.

Capital Markets and the Rise of Private Credit

Private credit has moved from the periphery to a core financing tool, driven by demand for alternative capital sources and the evolving regulatory landscape. Leaders noted that companies are increasingly turning to private markets instead of public offerings, as private credit provides flexibility and access to long-term capital. However, banks are reentering key lending segments, particularly in structured finance and middle-market deals, regaining market share from alternative lenders.

The convergence of public and private markets is also accelerating. As investment-grade private credit becomes more liquid, some leaders predict it will evolve similarly to high-yield bonds and leveraged loans. However, others caution that private credit’s strength lies in its insulation from public market volatility, and excessive liquidity could undermine its advantages.

Regulation and Market Adaptation

As private markets expand into wealth management and retail investing, regulatory scrutiny is increasing. While leaders acknowledged the need for thoughtful oversight, they emphasized that private markets remain well-regulated and systemically stable. With increasing capital flows into alternative investments, the biggest players are solidifying their dominance, leveraging scale, brand, and distribution capabilities to shape the next era of financial services.

Strategic Outlook for the Future

Leaders agreed that the financial industry is in a period of structural transformation, where firms that adapt to evolving market conditions, embrace technology, and leverage their balance sheets strategically will emerge as long-term winners. Despite the near-term challenges of inflation, policy uncertainty, and shifting competitive dynamics, the overall tone was optimistic. Those who stay focused on long-term growth, invest in innovation, and maintain a disciplined approach to capital allocation will be best positioned to succeed in this evolving landscape.

The winners in this environment will be those who take a forward-looking approach—staying resilient in uncertainty while capitalizing on opportunities that drive sustainable growth.

2025 Outlook and Deep Dives into Key Themes: Expectations vs. Reality

The past year has been a study in contrasts. Coming out of the 2024 RBC Financial Institutions Conference, expectations were high for economic resilience, strong credit quality, regulatory shifts, and an acceleration in M&A activity. Many anticipated that banks would capitalize on easing capital requirements, a friendlier regulatory environment under the new administration, and steady loan growth as businesses adjusted to a stabilizing rate environment. 

However, while some of these projections held true, others evolved in ways that few predicted. The regulatory landscape shifted more than expected, inflation proved stickier in certain areas, and while loan demand picked up, industry deposit levels continued to be impacted by quantitative tightening (QT). Banks that positioned themselves well to navigate these complexities saw meaningful gains, while others faced pressures from shifting credit conditions and geopolitical uncertainty.

At the 2025 RBC Financial Institutions Conference, industry leaders examined how these evolving realities are reshaping the banking sector, focusing on five critical areas: loan growth, regulatory developments, M&A, private credit competition, and the evolution of AI and technology. Below, we break down key expectations from last year’s conference, compare them to where we stand today, and analyze how financial institutions are positioning themselves for the future.

🌟 1. Economic Growth and Loan Demand: Rebounding, but with Caution

• Expected (2024): GDP growth was projected at 2-2.5%, supporting stable loan demand. Banks were expected to see a rebound in commercial and industrial (C&I) lending as businesses regained confidence.

• Reality (2025): The economy has largely delivered on these expectations.

As Gerard noted, “Banks are products of their economy. If we’re running at 2.5% GDP growth and nominal growth of 5%, the sector will perform well.”

However, loan growth has been uneven—stronger for larger corporates but more muted for smaller businesses, where uncertainty over policy and consumer demand has led to hesitation.

• Regional and mid-sized banks have been the primary drivers of loan growth, focusing on healthcare, infrastructure, and energy sectors.

• CRE lending remains challenged, with banks shifting toward multifamily and industrial properties, while office lending remains constrained.

• Small business optimism, fueled by post-election sentiment surveys, suggests continued loan demand into 2026.

Gerard’s perspective: “Loan growth is happening, but banks are being selective. They’re willing to lend, but only to the right customers, in the right industries, under the right conditions.”

🌟 2. Interest Rates: Higher for Longer Pays Off

• Expected (2024): With inflation moderating, the Fed was expected to start rate cuts in mid-to-late 2024, bringing relief to funding costs while sustaining net interest margins (NIMs).

• Reality (2025): As expected the Fed started cutting rates, 100 basis points, in the fourth quarter of 2024, with more rate cuts (25-50 basis points) likely in 2025.

As Gerard observed: “We have to go back 20 years to find a time when banks were able to earn this much from their deposits. The longer this rate environment holds, the more banks can reinvest at favorable spreads.”

Banks benefit from higher-for-longer rates, as low-cost core consumer deposits fund higher yielding assets. Additionally, as term loans and securities mature the proceeds are re-invested into higher yielding assets result in higher net interest margins. Though the banking sector remains positioned to benefit, margin compression could emerge if competition for deposits leads to higher-than-expected deposit costs.

🌟 3. Regulatory Shifts: A New Administration, A New Approach

• Expected (2024): With a new administration in place, regulatory oversight was expected to ease, particularly for large-sized banks burdened by Basel III capital requirements.

• Reality (2025): Expectations for notable shifts in regulation, i.e., Basel III “Endgame”, LTD (Long Term Debt) requirements, etc. have arisen with the replacement of the regulatory heads at the FDIC, OCC, CFPB and Vice Chair of Safety and Soundness at the Federal Reserve.

Key developments:

• The FDIC already announced on March 3, it rescinded its 2024 Statement of Policy on Bank Merger Transactions.

• The Basel III Endgame proposal, originally expected to impose on average a 16% increase in CET1 (Common Equity Tier 1), is expected to be significantly revised, alleviating some pressure on the largest banks.

• Category IV regional banks, however, are still expecting to be required to include the unrealized losses in their AFS (Available For Sale) securities portfolios in regulatory capital.

Fed Governor Michelle Bowman has been vocal about the need for a more tailored regulatory framework for mid-sized banks, arguing that a one-size-fits-all approach is counterproductive.

“We must ensure that regulation does not inadvertently constrain the ability of well-managed banks to serve their customers and communities.” – Michelle Bowman

Despite these discussions, banks on the cusp of the $100 billion asset threshold are grappling with whether to scale up through organic growth or M&A or remain below regulatory breakpoints. Alternatively, these banks may choose to sell rather than incur the higher regulatory costs of moving above $100 billion in assets.

🌟 4. M&A: The Reopening of the Playbook

• Expected (2024): A stronger investment banking environment was anticipated, with M&A activity rebounding due to pent-up dealmaking demand and more favorable regulatory conditions.

• Reality (2025): While M&A activity is returning, the pace has been slower than expected.

“The M&A cycle is resuming,” Gerard noted, “but the pace hasn’t accelerated as quickly as many predicted. The regulatory environment is improving, but some caution remains among banks and corporations alike.”

Key Trends:

• Regional bank mergers and acquisitions ($50B-$90B in assets) should accelerate, as banks grapple with the decision whether to move above $100 billion in assets or sell-out.

• Larger banks, ($150-$700 billion) are looking at targeted acquisitions in depository institutions, payments, fintech, and wealth management.

Gerard’s take: “Consolidation has been a reality in banking for 40 years. The next wave will be strategic, focused on scale, and driven by new efficiencies.”

🌟 5. The Private Credit Challenge: Banks Regain Their Edge

• Expected (2024): Private credit was expected to continue gaining market share from traditional banks.

• Reality (2025): Banks are reentering the space with a renewed competitive edge.

Key developments:

• Traditional banks, with lower capital constraints, are expected to pursue corporate lending deals that private credit funds once dominated.

• The higher cost of private credit should drive borrowers back to banks, especially for structured and middle-market financing.

• However, private credit dry powder remains at record highs, ensuring non-bank lenders remain a force in the market.

Gerard stated: “The banks ceded ground to private credit in 2022 and 2023, but that’s changing. The competitive landscape is evolving, and banks are back in the game.”

🌟 6. AI, Technology, and the Next Phase of Banking Innovation

• Expected (2024): AI was expected to be a long-term investment focus, but its impact on profitability was still uncertain.

• Reality (2025): AI adoption has accelerated across front-office and back-office functions.

Key Developments:

• Operational efficiency (compliance automation, risk management, fraud detection).

• Customer engagement (AI-driven personalization, virtual assistants).

• Trading and investment strategies (algorithmic trading, real-time credit risk assessment).

Gerard’s view: “AI isn’t about who does it first, but who does it the best. The winners will be the banks that integrate it seamlessly and use it to cut costs while improving service.”

Final Thoughts: Adaptability is Key

The past 12 months have reinforced a central theme: the banking industry thrives on stability but adapts in uncertainty. While many of the 2024 projections held true, the realities of trade policy, regulation, and macroeconomic conditions have reshaped expectations.

As Gerard summed up: “This isn’t a ‘back to normal’ environment—it’s a ‘new normal.’ Banks that remain agile, strategic, and disciplined in capital allocation will be the ones that outperform.”

With trade policy disruptions, regulatory shifts, and an evolving interest rate landscape, financial institutions must remain adaptable. The 2025 RBC Financial Institutions Conference provided a critical forum for navigating these complexities, reinforcing the importance of strategic execution in the year ahead.

Closing Thoughts and Strategic Implications

The financial industry has entered a period of renewed momentum, with loan growth, capital flexibility, and regulatory clarity all trending in a positive direction. However, challenges remain—most notably, the risk of inflation reaccelerating and geopolitical uncertainties surrounding trade and tariffs.

Gerard put it bluntly: “The biggest risk to this bullish banking cycle is the return of inflation. If the Fed pivots back to tightening, everything changes.”

The prospect of persistent inflation and delayed Fed cuts will impact how banks manage balance sheets, pricing strategies, and capital deployment. Institutions must remain flexible in adjusting loan pricing and credit risk models while ensuring funding stability amid a potentially extended period of high rates.

At the same time, policy-driven market uncertainty has become the new normal, forcing financial institutions to navigate a business environment where corporate decision-making is increasingly delayed due to unpredictable trade and economic policies. The mere uncertainty around tariffs is already impacting consumer confidence, inflation expectations, and corporate pricing strategies. This volatility is making it more difficult for businesses to commit to long-term investments, and financial institutions will need to remain nimble in allocating capital and advising clients on risk mitigation strategies.

For banks, this means staying focused on balance sheet discipline, strategic M&A opportunities, and adapting to the evolving competitive landscape. The rapid growth of private credit, the increasing integration of AI, and the shifting regulatory framework all present opportunities for institutions that can execute effectively. Those that remain agile, invest in technology wisely, and maintain pricing power will be positioned to outperform in this complex environment.

As we look ahead to 2026, one thing is clear: this is not a passive environment for banks. The winners will be those that execute with precision, maintain balance sheet discipline, and stay ahead of macroeconomic shifts.

The 2025 RBC Financial Institutions Conference reinforced RBC’s thought leadership and market insights. As the leading financial institutions conference in the industry, it remains the premier forum for engaging with top executives, investors, and policymakers.

At RBC Capital Markets, our commitment remains steadfast: providing clients with clear, data-driven insights to navigate uncertainty and seize opportunities. As the financial industry evolves, we will continue to lead the conversation and drive forward-looking strategy.