From Comeback to Contender: Can Europe’s Banks Deliver Again in 2026?

European bank stocks have just wrapped up their strongest year on record, capping off a remarkable turnaround after more than a decade in the wilderness. 

In 2025, the EURO STOXX Banks Index surged around 76% by mid-December, eclipsing the previous high-water mark of 74% set back in 1997. What made the rally stand out wasn’t just the headline number, but its depth. Every bank in the index finished higher, with several posting gains well above 100%.

Shares in Société Générale and Commerzbank jumped roughly 139% and 136% respectively, while Banco Santander climbed about 110% and ABN Amro rose more than 100%. BBVA, CaixaBank, Deutsche Bank, and Bank of Ireland all delivered gains between 80% and 100%, underlining how broad-based the move really was.

The macro mix played nicely into banks’ hands. The ECB paused its easing cycle in June, keeping the deposit rate at 2%, high enough to sustain net interest margins well above pre-pandemic norms.

Strong capital positions added fuel. CET1 ratios across the sector sat comfortably in the mid-teens, allowing banks to boost dividends and share buybacks. Valuations amplified the move too, with many lenders starting the year at single-digit P/E multiples and deep discounts to book value.

What Does This Mean for Me?

Looking ahead to 2026, the narrative is shifting. With rates no longer the main story, investors are focusing on earnings growth, efficiency, and execution. Analysts expect double-digit EPS growth despite still-muted valuations, suggesting European banks may have more to give, even after a historic year.