Friday, 5 December 2025 Reading time : 3 minutes

European bank shares have been among the top performers on the stock market this year. The Euro Stoxx Banks Index, which comprises the largest banks in the eurozone, has gained almost 80% since the beginning of the year (as of 4 December 2025, total return), leaving the Euro Stoxx 50 far behind (+20.5%). Having recovered from a brief slump in the summer, the European banking index is currently trading at its highest level since 2008, before the financial crisis shook the markets. 

The outperformance of individual bank stocks is even more striking. Société Générale, Banco Santander and BBVA have each more than doubled their share prices since the start of the year. By comparison, BNP Paribas seems almost modest with a 40% increase in share price.  

With their positive performance this year, bank shares are continuing the upward trend of previous years. The sector has benefited from the European Central Bank's (ECB) interest rate policy, which saw key interest rates gradually raised between 2022 and 2024. This has improved the net interest margin of financial institutions and supported their profits, as reported by Reuters. 

However, banks are not only benefiting from favourable market conditions. Many financial institutions are also attracting investors with generous dividends and share buybacks. This trend has been evident for several years. According to a European Central Bank study, the largest European banks returned more than EUR 61 billion to their shareholders in the form of share buybacks between 2020 and 2024. These volumes have risen steadily over the years. 

Financial institutions are continuing to buy back their own shares in the current year. According to estimates by DZ Bank, European banks are likely to buy back shares worth more than EUR 24 billion for the year as a whole.

Whether the rally continues in 2026 will depend on various factors, including the ECB's interest rate policy and economic developments. Given the recent slight slowdown in eurozone inflation, Reuters' analysis suggests that the ECB is unlikely to make further interest rate cuts in the medium term. The surge in European bank shares could therefore transition into a more subdued but stable phase. 
However, the market environment can change quickly, and European bank shares are likely to be vulnerable to corrections following their recent increase.
 
Investors who believe that European banks will continue to rise, but who also want to mitigate potential losses, may be interested in the barrier reverse convertible on Banco Santander, BBVA, BNP Paribas and Société Générale. The product has a barrier of 64% and pays a guaranteed coupon of 14.20% p.a.

Reverse Convertible on European Banks
14.20% p.a. BRC on Banco Santander, BBVA, BNP Paribas, Societe Generale
Barrier: 64%
Valor: 151 091 163

Indicative terms

 

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