Europe’s private banks are approaching a turning point after years of high profits. Although the sector reached a record profit pool of €29,2 billion in 2025, growth is losing significant momentum. Falling interest margins, weaker wealth growth in Europe and technological change driven by artificial intelligence are increasingly weighing on institutions. These are the findings of a new McKinsey study.

Slower Growth

After a strong 22 percent jump in profits in 2023, growth slowed to four percent in 2024 and six percent in 2025. At the same time, revenue margins declined to 73 basis points of assets under management, while costs continued to rise. The cost-income ratio improved only slightly in recent years, reaching 67 percent.

McKinsey identifies three developments as the main structural challenges: Europe’s comparatively weak wealth growth, the upcoming generational wealth transfer and the rapid progress of artificial intelligence.

While private financial wealth in Europe is expected to grow by 4,8 percent annually until 2030, McKinsey forecasts growth of 7,7 percent in the Asia-Pacific region. In addition, around €2,4 trillion in assets will be transferred to the next generation by 2030 – a process that, according to the study, could put 10 to 15 percent of the pre-tax profit of a typical mid-sized wealth manager at risk.

Demographic change and the generational shift will profoundly alter expectations and demands around advice, service and client retention, the study says. Instead of focusing solely on financial advice and wealth management, relationship managers will need to evolve into coordinators of client relationships, involving the next generation as «life» or «family advisers».

Clients Are Open to AI

At the same time, AI is becoming increasingly important. According to McKinsey’s survey, 26 percent of wealthy clients are already open to using AI for financial decisions or investment advice. However, many banks have so far limited their use of the technology to individual processes such as document creation or knowledge management. According to the authors, the institutions that remain competitive will be those that comprehensively integrate AI into advice, portfolio management and operational processes. Wealthy clients are adopting AI faster than private banks are implementing it.

AI is rapidly developing into a competitive advantage that could increase relationship manager productivity by up to 45 percent. This could significantly reduce compliance burdens and improve the quality of client interactions. It would also allow relationship managers to focus more strongly on acquiring new clients.

Considerable Potential

Nevertheless, McKinsey sees considerable potential. By making more consistent use of existing client relationships, improving relationship manager productivity, deploying AI comprehensively and adopting more efficient operating models, Europe’s private banks could increase their profitability by 25 to 35 percent by 2030. This would correspond to additional profit potential of up to €10 billion. However, this would require a fundamental strategic shift – away from incremental improvements and towards a realignment of distribution, technology and organisation.