RISING TIDES
Observations from the IMC Research Process

The Year’s Unlikeliest Rally

In a year defined by trillion-dollar AI narratives, it’s a 150-year-old German lender ($DB) that’s quietly up over 100%, while $NVDA is up around 30%.

• DB isn’t alone. European banks have gone from serial underperformers to market leaders. After more than a decade of restructuring, litigation fatigue, and negative-rate drudgery, these banks are now benefitting from a steeper yield curve, normalized loan losses, and reduced regulatory overhangs. With balance sheets rebuilt and dividends rising, investors are rediscovering the sector – a rotation into cash-yielding financials with operational torque.
• Back in the game. Years of chronic underperformance left these banks deeply under-owned, amplifying the rally as capital flows back into the sector. Earnings beats, rising payouts, and still-low valuations are drawing in both yield-focused and growth-oriented buyers, creating momentum rarely seen in the space.
• From Laggard to Leaderboard. Deutsche Bank ($DB) – restructuring and fixed-income strength are finally driving a rerating. Banco Santander ($SAN) – overtook UBS as continental Europe’s most valuable bank with a €122 B market cap as of April. UniCredit ($UCG) – delivered record Q2 earnings, hiked dividends by 46%, and launched a €3.6 B buy-back; analysts expect it to return ~110% of net profit over the next three years through capital returns (dividends + buybacks).

Bottom line: The decade-long discount on European banks is no longer just a “value trap” narrative. It’s becoming a “growth at a discount” story – and one that investors can’t ignore.