How US and European banks won Q2 with three strategic moves

Here’s how each approach played out: 

1. Cost transformation creates capacity for tech investment

Banks maintained their disciplined balancing act – cutting costs strategically to fund future technology investments. By prioritizing efficiency gains to create investment capacity, banking leaders were able to capitalize on emerging opportunities without compromising near-term performance.
 

The artificial intelligence (AI) narrative has sharpened decisively over the past year. Banks have moved beyond experimentation to deploy use cases tied to measurable business outcomes such as customer engagement, operational efficiency and productivity gains. US banks, in particular, highlighted growing interest in agentic AI as they explore advanced applications with minimal human input.
 

Digital assets emerged as a second priority following recent US regulatory developments (pdf) (via EY.com US)². Several banks reported renewed investment in stablecoin-based solutions for cross-border payments and tokenized deposit infrastructure, with globally-focused institutions more vocal about their ambitions than domestic peers.
 

With technology investments broadening and pressure building to demonstrate tangible progress, turning this carefully created capacity into measurable impact will be a key differentiator going forward.
 

2. Capital markets positioning pays off

Banks executed well-timed positioning that transformed a volatile quarter into competitive advantage. When early uncertainty around US trade policy and market volatility emerged, banks sharply reset investment banking revenue expectations – a stance that created upside potential when conditions improved.
 

This proved prescient. As trade tensions eased and equity markets rebounded in June, banks were well-positioned to capture the recovery in client confidence that drove meaningful pickup in merger & acquisition (M&A) activity, delivering stronger-than-expected results, particularly for US banks that had managed expectations conservatively.
 

Prior investments in trading infrastructure became a key differentiator, enabling banks to absorb elevated volumes when persistent market turbulence forced clients to recalibrate portfolios.
 

Trading revenues grew 17% year-on-year to reach their highest levels since the first half of 2009, as banks enhanced capacity to reinforce their role as critical partners helping clients manage risk across asset classes.
 

Looking ahead, banks are set to maintain this disciplined approach. With announced global M&A volumes tracking 30% above last year, they see cautious optimism as boardrooms push forward with transactions despite ongoing volatility.
 

3. Proactive risk management proves prescient

Banks demonstrated foresight in their approach to credit risk as the first full reporting period under new tariff regimes unfolded. Anticipating potential stress from trade disruptions, banks had increased their loan loss buffers in the prior quarter, preparing for credit challenges that many expected would emerge.
 

However, no deterioration in credit quality materialized. So, while banks were right to prepare for potential stress, the actual impact proved more manageable than feared.
 

Proactive client engagement provided crucial intelligence throughout this period. By staying close to borrowers, banking leaders gained early visibility into how corporates were adapting to shifting trade conditions. These conversations confirmed that most clients had adjusted to new supply chain realities and were gaining clarity on cross-border impacts.
 

Reflecting the more stable outlook, analysts have started to revise full-year provision estimates downward by 2% for US banks and 1% for European peers.