{"id":185538,"date":"2025-12-15T09:33:08","date_gmt":"2025-12-15T09:33:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/185538\/"},"modified":"2025-12-15T09:33:08","modified_gmt":"2025-12-15T09:33:08","slug":"ai-boom-to-supercharge-european-banks-rally","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/185538\/","title":{"rendered":"AI boom to supercharge European banks’ rally"},"content":{"rendered":"\n

LONDON, Dec 15 (Reuters) – After a stellar 2025, investors expect shares in European banks to keep heading higher in 2026, supported by strong earnings and, crucially, cost savings stemming from artificial intelligence<\/a>.<\/p>\n

As fears of a recession and interest rate cuts from the European Central Bank have subsided, investors have turned \u200beven more positive towards European banks, revising up their expectations for the sector, despite a complicated backdrop.<\/p>\n

Meanwhile, AI has emerged as a new force drawing investors to \u200cEuropean lenders’ shares, partly because a dearth of technology companies in the region has forced many to hunt for AI beneficiaries in old-economy markets.<\/p>\n

Banks have started to use AI to improve operational efficiency and fraud detection, as \u200cwell as to reduce staff costs.<\/p>\n

“European banks could be a real beneficiary of AI,” said Helen Jewell, chief investment officer for fundamental equities at BlackRock, the world’s largest asset manager, with about $12 trillion under management.<\/p>\n

“A lot of the AI story has been focused on the revenue winners, but we also know that when it comes to AI, there is a beneficiary from the cost winners,” she said at a press event.<\/p>\n

UBS said in a note to investors they see AI as a key source of potential upside to banks’ near-term valuations and longer- term earnings.<\/p>\n

But \u2060that comes with risks.<\/p>\n

Warnings over AI-related exuberance and the risks \u200cof a dot-com style bust have come from various sides, including the International Monetary Fund and the Bank of England.<\/p>\n

And risks aren’t only AI-related.<\/p>\n

The ECB said euro zone banks face ‘unprecedentedly high’ risk of shocks including geopolitical tensions, shifting trade policies, climate-related crises and even a dollar squeeze for \u200dbanks exposed to the volatile U.S. currency.<\/p>\n

Yet investors have snapped up bank stocks in earnest. Societe Generale shares have rallied 140% this year, Commerzbank 125% and those in Barclays rose almost 70%. An index of European bank stocks is up more than 60%, on top of the 25% gain in 2024 and more than four times better than the pan European index.<\/p>\n

Investors also view them as relatively \u200bcheap, particularly when compared with U.S. banking shares. European bank stocks currently trade around 1.17 times their price-to-book value, some 40% below their 2007 peak and below the 1.7 \u200ctimes of their U.S. rivals, according to LSEG data.<\/p>\n

EARNINGS EXPECTATIONS JUMP<\/p>\n

In terms of costs, Goldman Sachs said in a note that costs would grow at a compound annual rate of only 1% between 2025 and 2027. The U.S. bank also sees efficiency continuing well into 2026, with banks’ cost\/income ratios improving by 130 basis points year on year, meaning companies are expected to spend less to generate income.<\/p>\n

Consulting firm McKinsey estimated last year that AI could bring the global banking industry as much as $340 billion a year in additional value, with a drop in operational costs of 20%.<\/p>\n

Even if AI implementation savings take years to fully emerge, it will be a big enough shift to drive greater expansion in valuations, UBS \u2060said.<\/p>\n

Last month, analysts raised their net revisions for the sector by the most since May 2023, \u200band 12-month forward earnings growth expectations jumped to the highest since 2023, according to IBES data.<\/p>\n

Growth in bank \u200blending to euro zone firms is still running near its highest since mid-2023, according to the most recent ECB data. Credit growth to businesses was unchanged at 2.9% in October – just below August’s 3%, the most since May 2023 – compared to the previous month, while loan growth to households \u200daccelerated to a 2-1\/2-year high of 2.8% from \u20602.6%.<\/p>\n

BlackRock’s Jewell expects European banks to return 20-25% of market value to shareholders over the next three years via dividends and share buybacks.<\/p>\n

“If you put together valuation and … the shareholder remuneration, you still have an asset class that is quite attractive,” Equita co-head of research Domenico Ghilotti said, adding that merger activity is another \u2060driver underpinning the sector.<\/p>\n

The takeover of Mediobanca by state-backed Monte dei Paschi di Siena was one of the biggest in the sector this year, transforming Italian banking. Other deals could be on the way.<\/p>\n

“What we are \u200cseeing is economic resilience within Europe, and that means that even if we do see more rate cuts, that economic resilience… will be good for \u200cEuropean banks,” BlackRock’s Jewell said.<\/p>\n

(Reporting by Joice Alves; Editing by Amanda Cooper and Susan Fenton)<\/p>\n","protected":false},"excerpt":{"rendered":"LONDON, Dec 15 (Reuters) – After a stellar 2025, investors expect shares in European banks to keep heading…\n","protected":false},"author":2,"featured_media":185539,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[345,44225,343,344,27880,107386,11157,107387,85,19127,46,125],"class_list":["post-185538","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-ai-story","tag-artificial-intelligence","tag-artificialintelligence","tag-blackrock","tag-european-banks","tag-european-central-bank","tag-helen-jewell","tag-il","tag-international-monetary-fund","tag-israel","tag-technology"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/185538","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=185538"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/185538\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/185539"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=185538"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=185538"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=185538"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}