European bank shares to rise in 2026 after a solid 2025, driven by strong profitability and, critically, AI cost savings.
Despite a complex backdrop, investors have become more optimistic about European banks as recession fears and European Central Bank interest rate cuts have eased.

“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 told a news conference.

In a note to investors, UBS identified AI as a significant driver of bank prices and earnings.

The IMF and Bank of England have warned about AI-related euphoria and dot-com busts.
AI isn’t the only risk.
The ECB warned euro zone banks of ‘unprecedentedly high’ shocks from geopolitical tensions, altering trade policies, climate issues, and even a dollar squeeze for banks exposed to the volatile U.S. currency.
Investors have bought bank stocks in droves. Societe Generale (SOGN.PA) shares soared 140%, Commerzbank (CBKG.DE) 125%, and Barclays (BARC.L) roughly 70% this year. A European bank stock index (.SX7P), opens new tab, is increased more over 60%, up from 25% in 2024, and four times stronger than the pan European index (.STOXX).