European banking stocks surge ahead of US, Asia rivals in H1 2025

European banks' stock performance eclipsed that of their US and Asian counterparts by a wide margin in the first half, marking a turning point for the sector.

Despite the market shock triggered by the US tariffs announcement in April, the S&P Europe BMI Banks index jumped 51.59% over the six-month period, versus a 14.54% rise in the US S&P 500 Bank index and 17.97% in the S&P Pan Asia BMI Banks index, S&P Global Market Intelligence data shows.

European banks have reported higher profits since central banks began hiking interest rates aggressively in 2022 to tame surging inflation. The lending income boost from higher rates allowed banks to deliver bumper capital distributions to shareholders. But despite interest rates falling in 2024, large banks' profits remained strong, backed by revenue growth that was driven by interest rate risk management, stronger fee generation and resilient lending income.

In the last two years, large European banks have outperformed US peers in terms of returns on average equity (ROAE) and average total payout ratio, according to Market Intelligence data. These factors have strengthened the investment case for European banks, analysts said at a June 18 webinar co-hosted by Market Intelligence and the European Banking Federation.

– Access a recording of an S&P-EBF co-hosted bank valuations webinar. – Access indexes, including regional bank indexes, on the S&P Global Capital IQ Pro platform.

Notable gainers

UK-based Metro Bank Holdings PLC was among the best-performing European banking stocks in the second quarter with a total return of 48.4%.

Shares in the high street lender started to gain ground in April and spiked on June 14 following reports that it received a takeover approach from private equity firm Pollen Street Capital, which was later rejected by the bank's board following a disagreement on valuation. Its majority owner, Colombian businessman Jaime Gilinski Bacal, was subsequently reported to be considering options for his nearly 53% stake in Metro Bank.

Also on the list is Alpha Bank SA with 37.5% in total return. Italy's UniCredit SpA recently doubled its stake in the Greek bank to about 20% and said it intends to raise it to as much as 29.9%. Alpha Bank's domestic rival, Eurobank Ergasias Services and Holdings SA, was also among the best performers with gains of 23.2%.

Another UniCredit target, Commerzbank AG, joins the list with a total return of 31.0%. The German lender's shares have leaped more than 82% since UniCredit started building up a stake in it in September 2024, and that position has since grown to just under 30%. In June, CEO Bettina Orlopp said Commerzbank's share price growth reflects its strong performance in recent quarters, in response to UniCredit CEO Andrea Orcel's statement that its stock rally does not exactly reflect its "fundamentals."

Netherlands-based ABN AMRO Bank NV, Portugal's Banco Comercial Português SA and Spain's Unicaja Banco SA also made the top 15.

Worst performers

Six Swiss cantonal banks were on the worst-performing list, including Banque Cantonale Vaudoise, Graubündner Kantonalbank and Basler Kantonalbank, as authorities hammer out sweeping financial reforms. The country's largest bank, UBS Group AG, is facing a potential extra capital demand of up to $26 billion under the bank reform push.

UK mortgage lender Nationwide Building Society is also on the list with negative total returns of 1.1%, while HSBC Holdings PLC — Europe's biggest bank by assets — logged just 1.8% in total returns.

Other poor performers include Poland's PKO Bank Polski SA and Alior Bank SA.