Live Markets: Europe's banks: the only way is up

Erste Bank AG

14/01/2026 12:44

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EUROPE'S BANKS: THE ONLY WAY IS UP

European banks have outperformed the broader market for the last five years, and the re-rating of the sector is causing some investors to question whether the rally can continue.

Both Barclays and UBS have attempted to answer that question, and both are cautiously optimistic on the sector.

"After such a strong run, the bar for more is higher, but upside is still possible in our view," Barclays says.

They note valuations are still at a discount to long-term average, EPS momentum is strong, and that dividend and buyback yields are supportive. Barclays also flags that the sector is a consensus long among hedge funds, but long-only exposure is below highs.

UBS recommends taking a more stock-specific approach.

"While a re-rated sector mathematically leaves less upside than before we think too much focus on sector aggregates risks giving too little focus to the stocks which we think still offer outsize returns," UBS says.

Their top picks are ABN Amro ABNd.AS, Barclays BARC.L, BNP Paribas BNPP.PA, Erste ERST.VI, ING INGA.AS, Piraeus BOPr.AT, Santander SAN.MC and SocGen SOGN.PA.

AI is also likely to be supportive this year, according to both Barclays and UBS, as they believe the sector could be among the first to recognise productivity and efficiency gains from AI adoption.

(Samuel Indyk)

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EARLIER ON LIVE MARKETS

THE END OF THE ROAD FOR YEN WEAKNESS CLICK HERE

STOXX, FTSE HITS NEW PEAKS CLICK HERE

BEFORE THE BELL: EUROPEAN FUTURES FLAT, METALS SHINE CLICK HERE

TURBOCHARGED 'TAKAICHI TRADE' PUTS MARKETS ON YEN WATCH CLICK HERE

eu open https://tmsnrt.rs/49wwOcI

Europe's banks have outperformed for 5 years https://www.reuters.com/graphics/EUROPE-BANKS/gkvlqzlkdpb/chart.png