RISING TIDES
Observations from the IMC Research Process

The Tide Keeps Rising for European Banks

What began as ‘The Unlikeliest Rally’ has become something far more enduring – Balance sheet strength, record payouts, and strong returns on equity are turning Europe’s long-time laggards into market leaders.

• Momentum that’s sticking. What began as a rate-cycle trade has become structural. Years of balance sheet repair, digital investment, and capital discipline are paying off. Loan growth is back, costs are falling, and capital returns are compounding faster than earnings.
• Momentum that’s broadening. The strength now spans the sector. Capital ratios sit in the mid-teens, generation runs 200–250 basis points a year, and payouts are nearing full distribution. Lloyds’ 18% return and 20% dividend growth target show how durable this has become.
• Stock specifics tell the story. Barclays’ Best Egg deal adds fee growth without capital strain; Deutsche’s private bank rebound boosts margins; UniCredit buybacks exceed 10% yield; ABN and Mediolanum are rerating on cost control and surplus capital. All echo the same theme: real earnings power, real distributions, and a broad rerating underway.

Europe’s banks aren’t just healing—they’re performing. Capital is abundant, payouts are visible, and returns are real.