Asian Banks "After two decades of cost discipline, what’s next for Asian..."

Research evidence excerpt

Asian Banks "After two decades of cost discipline, what’s next for Asian..."

Global Research

18 May 2026ab

Asian Banks Equities

AsiaAfter two decades of cost discipline, what’s next

for Asian banks? Banks

Aakash Rawat, CFA

Analyst

aakash.rawat@ubs.com

AI as the next phase of cost efficiency +65-6495 8283

Asian banks have spent the past two decades relying heavily on cost discipline to offset Benjamin Tan

structural revenue headwinds, with meaningful but incomplete success in our view. As Analyst

traditional efficiency levers mature, we believe AI now represents the most important benjamin.tan-yx@ubs.com

opportunity to drive structural cost efficiencies, albeit with likely limited near-term P&L +65-6495 3239

impact as deployments remain incremental. Our key takeaways are threefold: 1)

historical cost efficiency gains have cushioned, but not fully offset, revenue pressure; 2)

AI’s medium-term impact will likely be highly uneven across markets and banks, driven

by structural readiness rather than technology availability alone; and 3) despite this, AI

optionality appears largely unpriced, with little differentiation at the sector, market or

bank level today. Over time, we see scope for AI readiness to emerge as a driver of

valuation divergence (please refer to our companion APAC Focus note here).

Cost efficiency has been the primary offset – but insufficient

Over the past 20 years, banks have used cost efficiency as the dominant lever to defend

profitability, with opex-to-assets declining materially across most Asian markets. These

gains have been driven by banking consolidation, branch rationalisation, process

automation and tighter headcount discipline. Banks have also invested heavily in

technology over this period; however, much of this spend has largely focused on