LIVE MARKETS-European bank rally 'faster and stronger' than predicted - UBS

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EUROPEAN BANK RALLY 'FASTER AND STRONGER' THAN PREDICTED - UBS

The rally in European banks so far in 2025 has been faster and stronger than UBS analysts expected, with the space up more that double versus the wider market year-to-date.

A basket of European bank stocks .SX7P is up 25.2% so far this year according to LSEG Workspace while the benchmark STOXX 600 .STOXX is up 8.6%.

In fact, UBS points out that a quarter of the STOXX 600's top 20 performers this year so far are banks; namely Societe Generale SOGN.PA, Sabadell SABE.MC, Commerzbank CBKG.DE, Santander SAN.MC and Banca Popolare di Sondrio BPSI.MI.

So what is behind the blistering performance?

UBS highlights five aspects.

The first two are fairly straightforward; the 10% equity rally itself and a return of the Eurozone macro surprise index to positive territory.

The third is a stellar fourth quarter results season in which all of the banks that UBS tracks beat consensus revenue forecasts.

Earnings revision weakness outside of banks is also a contributing element and the fourth in their list.

Finally, in fifth place is the partial unwind of the fourth quarter 2024 consensus trade of buying U.S. banks for 10% forecast average EPS growth, higher terminal rates, stronger forecast nominal GDP, deregulation and a stronger dollar.

(Lucy Raitano)

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