Key facts
- European banks are anticipated to report a significant increase in second-quarter profits.
- Higher interest rates and robust trading activities are the primary drivers of expected profit growth.
- Goldman Sachs projects an 11% year-on-year rise in pretax profit for the sector.
- Key banks reporting include UniCredit, Santander, BNP Paribas, Barclays, Deutsche Bank, UBS, and BBVA.
- The EURO STOXX Banks Index has doubled in value over the past two years, reaching its highest level since the 2007-2008 financial crisis.
European banks are poised to report a significant boost in second-quarter earnings, mirroring the revenue surge seen at their U.S. counterparts. Analysts anticipate that gains from higher interest rates and, in some cases, strong trading and investment banking activities will drive profitability. Goldman Sachs forecasts an 11% year-on-year increase in pretax profit for the sector, citing volume-led revenue growth, improving efficiency, and stable asset quality.
UniCredit and Santander are scheduled to kick off the earnings season on Wednesday, with BNP Paribas following on Thursday. Next week will see reports from Barclays, Deutsche Bank, UBS, and BBVA. This expected profit increase follows a more than two-year trend of rising profitability for European banks, supported by wider lending margins and controlled credit losses, which has propelled bank stocks to their highest levels since the 2007-2008 financial crisis.
While the European Commission has proposed measures to ease banking mergers and cross-border operations, concerns linger about the impact of struggling European economies and potential increases in bad debt provisions. Volatility in financial markets, partly attributed to the Iran war, has benefited trading desks and investment banking, although U.S. banks continue to lead in this area. Analysts at Morgan Stanley have recommended buying Deutsche Bank shares, viewing it as undervalued, while expressing caution on UBS due to new Swiss regulations.