From the brilliance of 2025 to the journey towards 2026: the old economy meets new engines, artificial intelligence adds more momentum to the rise of European bank stocks.

After the glorious year of 2025, investors expect European bank stocks to continue to rise in 2026, benefiting from strong profitability and crucial cost savings brought about by artificial intelligence. As concerns about economic recession and interest rate cuts by the European Central Bank gradually fade, investors have become more optimistic about the European banking sector, despite the complexity of the environment, they have raised their expectations for the industry. At the same time, artificial intelligence has become a new force attracting investors' attention to European bank stocks, partly due to the lack of tech companies in the region, forcing many investors to look for beneficiaries of artificial intelligence in traditional economic markets. Banks have started using artificial intelligence to improve operational efficiency and fraud detection capabilities, while reducing employee costs. European bank stocks are expected to achieve their best annual performance in 2025 European bank stocks had a historic rise in 2025, becoming one of the strongest years in the industry's history, marking a decisive shift in investor sentiment after more than a decade of poor performance. As of December 12, the EURO STOXX Banks index had risen by 76% year-to-date, on track to achieve its best annual performance ever, even surpassing the 74% rise in 1997. The most notable aspect of this rally is the wide coverage. All constituent stocks in the index recorded positive returns, with more and more lending institutions achieving triple-digit returns. Among the standout performers are French Industrial Bank and German Commercial Bank, whose stock prices rose by 139% and 136%, respectively; Santander Bank in Spain saw its stock price rise by 110%, while the Dutch Bank's stock price rose by 102%. Why did European bank stocks rise in 2025? The industry benefited from what many strategists describe as the macroeconomic "best timing". The Eurozone interest rates remained high enough to support profit margins, economic growth was strong enough to protect asset quality, and capital buffers were sufficient to return to shareholders. The European Central Bank stopped its rate cut cycle in June 2025, and has since maintained the deposit facility rate at 2%. Although far below the peaks of 2023-2024, the policy rate remains well above pre-pandemic levels, allowing Eurozone lending institutions to maintain high net interest margins. At the same time, economic growth exceeded market expectations. Germany avoided a severe industrial recession, Southern Europe continued to benefit from a strong tourism sector and EU investment inflows, and fiscal policies across EU countries remained mildly supportive.