Morgan Stanley’s forecast comes as banks push to realize the cost savings promised by AI while shifting a growing share of their operations online. Based on an analysis of 35 banks, the cuts are most likely to occur in so-called “central services” divisions, which include back-office and middle-office functions, as well as roles in risk management and compliance.
“Many banks are reporting efficiency gains of up to 30% from AI and further digitalization,” Morgan Stanley noted.
European banks are under strong pressure from investors to find new ways to reduce costs and improve returns on equity, which have consistently lagged behind those of their U.S. peers.
Morgan Stanley analysts added that AI gives banks an opportunity to improve their cost-to-income ratios—a key efficiency metric closely watched by investors—especially since previous waves of cost-cutting have largely run their course.
Banks have already begun to describe AI as a catalyst for operational restructuring.
In November, Dutch lender ABN Amro said it plans to cut around one-fifth of its workforce by 2028. In March, Société Générale CEO Slawomir Krupa warned that “nothing is sacred” in the bank’s campaign to reduce persistently high costs.
The forecast highlights how continued digitalization and the rollout of AI could significantly reshape Europe’s banking landscape in the coming years. Retail-focused banks are expected to be particularly affected, especially in countries such as France and Germany, where cost-to-income ratios remain elevated.
