European banks hike lending income guidance on higher rates, strong loan volumes

Many of Europe's biggest banks increased their 2026 lending income guidance as higher interest rates and strong loan growth boosted performance in the second quarter.

Thirteen of the 30 biggest banks in the region by total assets upgraded their full-year net interest income (NII) targets when they reported earnings, an S&P Global Market Intelligence analysis shows.

The largest Benelux lenders posted some of the strongest NII gains in the second quarter and all increased guidance, alongside banks in the UK, Germany, Italy and Spain.

Senior executives pointed to a favorable interest rate environment and strong lending volumes as the main reasons for raising their outlook. This matched a trend that analysts had predicted after the European Central Bank (ECB) shifted its monetary policy to keep inflation at bay amid the war in the Middle East.

Benelux banks upbeat on volumes

ING Groep NV cited volume growth, pricing and prolonged hedging tailwinds when it raised its expectations for commercial NII. The Amsterdam-based lender is betting on primary retail customers to drive above-target loan and deposit growth rates, boost earnings and make the bank more competitive, CEO Steven van Rijswijk said on the bank's July 30 earnings call.

Belgian lender KBC Group NV expects loan growth of at least 6% to fuel NII growth for 2026 while lending margins come under pressure, particularly in domestic mortgages, CEO Johan Thijs said on the bank's earnings call.

ABN Amro Bank NV pointed to higher rates and increased demand from its expanded clearing client base in raising its commercial NII outlook. This includes additional NII as a result of its acquisition of Dutch retail lender NIBC Bank NV

"The interest rate environment continues to be a tailwind," ABN Amro CEO Marguerite Bérard said Aug. 12.

The loan books of large listed European banks have expanded at a pace that far outstripped the region's economic growth forecasts, Market Intelligence data shows. Net customer loan growth of a sample of European banks jumped 8% year over year in the second quarter.

Uplift seen beyond 2026

Italy's Intesa Sanpaolo SpA foresees lending income accelerating in the second half of 2026, with growth likely extending into 2027. Intesa expects its 2026 NII to exceed €15 billion.

"We think that loan growth will continue to stay very positive," said Intesa CEO Carlo Messina during the bank's July 29 earnings call. "In 2027, we think that we will continue to grow in terms of loan growth."

Deutsche Bank AG CFO Raja Akram also attributed its updated NII outlook to volumes, noting that the benefits of higher rates "will become more pronounced" in 2027-2028 owing to the bank's hedging strategy.

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For Asia-focused HSBC Holdings PLC, CEO Georges Elhedery cited strong lending momentum in the bank's two biggest markets — the UK and Hong Kong — higher rates and a hedging strategy as support for improving its NII outlook for the second time.

HSBC now expects banking NII to reach at least $46 billion in 2026. It previously guided for banking NII to reach about $46 billion after setting an earlier target of at least $45 billion.

"We're very pleased to see growth in the UK … but we're also very pleased to see finally Hong Kong resume loan growth after many quarters of contraction or flat [growth]," Elhedery said during the bank's Aug. 4 earnings call. "This is very encouraging for the future."

Better quarters ahead

Analysts upgraded the 2026 NII consensus estimates for 15 out of the 25 largest publicly listed banks in Europe, according to Visible Alpha data.

The biggest upgrade was for UBS, with its full-year NII now expected at €8.02 billion, 7.1% above the previous consensus estimate. This was followed by Spain-based Banco Bilbao Vizcaya Argentaria SA and Banco Santander SA, whose consensus estimates rose 2.3% and 1.9%, respectively.

UBS Group AG CFO Todd Tuckner said strong loan growth, higher rates and a favorable deposit mix would more than offset margin compression in lower rate currencies. The Swiss bank now forecasts NII in its global wealth management business to increase 10% year over year, compared to previous expectations of low single-digit growth.

BBVA increased its NII guidance for Mexico, its biggest source of lending income, on the back of strong financing demand in the public sector. Back home, Spanish NII is still projected to grow by low to mid-single digits in 2026, although CEO Onur Genҫ said the bank expects customer spreads to improve.

Santander CEO Héctor Grisi said prospects for the bank's retail and commercial businesses in Europe, as well as for its digital bank platform Openbank, are "looking better." The bank maintained its guidance of its fee income growing faster than NII, but Grisi was confident Santander is positioned to exceed some of its targets for 2026.

Visible Alpha consensus estimates were also upgraded for ABN Amro, Intesa, KBC, HSBC, ING, Deutsche Bank Skandinaviska Enskilda Banken AB (publ), BNP Paribas SA, Crédit Agricole SA, Barclays PLC, UniCredit SpA and Société Générale SA.

The ECB in June raised its benchmark interest rate by 25 basis points to 2.25%, and it is expected to deliver another rate hike in September. Denmark's central bank also increased its rate while the UK and Switzerland left their key rates unchanged.

More room for growth

For banks that did not officially change their targets, many senior executives still hinted of improving outlook for their lending businesses.

"The expected higher ECB rates will be beneficial, and we anticipate further volume growth. With all these drivers moving in the same direction, we are confident that the net interest income will increase over the coming quarters," Commerzbank AG CFO Carsten Schmitt said during the bank's earnings call on Aug. 6. The German lender maintained its 2026 NII guidance of €8.6 billion.

French lender Crédit Agricole retained its guidance of a high-single digit NII for 2026 despite a 38% year-over-year surge in regional banks' NII in the second quarter.

"We're going to stay on that guidance. Maybe it's a little bit prudent," Crédit Agricole CFO Clotilde L'Angevin said.

Over the medium term, accelerating loan growth and strong pipelines will likely continue to support strong revenue prospects for European banks, Morgan Stanley analysts said in an Aug. 3 note.