While banks from the Mediterranean arc (Italy, Spain) have contributed heavily to the sector's performance, champions have ultimately emerged across the board. In France, it is Société Générale and its 153% rise in 2025 that has stolen the limelight. Long out of favour because of below-average performance, the red-and-black bank has reinvented itself, becoming a darling amongst investors. Over three years, the stock has risen by 213% (dividends reinvested), well ahead of Crédit Agricole (+105.8%) and BNP Paribas (+88%), which has lost its status as the sector's star.

Source MarketScreener (performance with dividends reinvested)

The stars are still aligned

Analysts covering the banking sector generally believe the stars are still aligned for European lenders, which still trade at roughly a 33% discount to their US peers. Bank of America, for instance, notes that the sector trades at around 9x to 10x earnings and 1.4x tangible book value, despite profitability that is now high and stable, with ROTE rising as it benefits from favorable conditions. This ratio measures a bank's ability to create real value with its tangible capital-and therefore its valuation and its ability to reward shareholders sustainably. For example, it averaged 6.1 between 2014 and 2023 for Société Générale, and is expected to rise to 9.8% this year and 11% in 2027.

The sector's share price rally is viewed as virtuous because it has been driven by improving results. That trend should continue: 10% to 11% average annual growth through 2028, with stronger performance in Central Europe, Greece and Spain. The level of ECB rates, ongoing European reforms and hoped-for AI-related savings are underpinning the robustness of forecasts.

In this context, shareholders have been well looked after and should continue to be so. Record capital ratios and significant surplus capital make it possible to pay dividends AND buy back shares. The average payout yield of the 40 largest European banks currently stands at 6.3% (dividends plus buybacks combined, S&P Capital IQ/MarketScreener data). 

The French banking trio reports Q4 and FY 2025 results this week

  • Crédit Agricole (Wednesday February 4, at 7 a.m.): the green bank, with its complex structure and its stable of listed regional banks, continues to draw mixed views among professionals. Out of these three French banks, it has the fewest positive recommendations.
  • BNP Paribas (Thursday February 5, at 7 a.m.): formerly the largest European bank appears to be regaining market interest, partly because it is lagging its peers. Since January 1, UBS and JP Morgan have turned buyers again, while Goldman Sachs, RBC and Oddo BHF have raised their target prices for the stock substantially.
  • Société Générale (Friday February 6, at 6:25 a.m.): despite its impressive share-price run, analysts believe the group has further upside. Fourteen of the 19 brokers which monitor the stock are positive. In recent weeks, as noted previously, there has nonetheless been a slight bias in favour of BNP Paribas.

UBS, Santander, Unicredit… many other results this week

Amongst other European banks, note Banco Santander and UBS Group (Wednesday February 4), BBVA and Unicredit (Thursday February 5), Banca Monte dei Paschi (Monday February 9), Barclays (Tuesday February 10), Commerzbank (Wednesday February 11), KBC (Thursday February 12), Natwest (Friday February 13) and HSBC (Wednesday February 25). 

Yesterday, Intesa announced €50bn in returns to shareholders by 2029 as it unveiled a new medium-term plan. Italy's second-largest bank posted 2025 net profit of €9.3bn and expects to reach €11.5bn by 2029. Its market capitalisation of €123bn slightly exceeds that of BNP Paribas… for now.