Despite continued political and macro uncertainty in 2025, the core thesis on financials has been validated in both Europe and the U.S.
European banks delivered another strong year, with valuations re-rating from ~7x to ~9x earnings while earnings momentum stayed positive and 2027 estimates rose about 20%. Improvements were broad-based, helped by better-than-feared margins as rates eased, a steeper yield curve, recovering volumes, solid fee income, and tightly managed costs and provisions. With asset quality supported by limited recent credit growth, the backdrop looks durable into 2026, and banks still appear cheap versus the wider European market, especially after factoring dividends and excess capital.
In the U.S., macro sentiment has been volatile, but easing regulation is becoming a key tailwind and should drive a multi-year regional bank M&A cycle already showing clear proof points.
Watch the latest analysis by Benjie Creelan Sandford (Equity Analyst, Algebris Investments)
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