European banks have delivered solid gains in 2025, with the Stoxx 600 Banks Index up around 21% year to date, a slowdown from the 66.95% rise in 2024. The sector ranks among Europe’s strongest performers, on par with U.S. peers in the KBW Nasdaq Bank Index, also up 22%. Citi analysts warn that momentum is fading as valuations no longer look excessively cheap and earnings upgrades begin spreading to other sectors. The sector still offers a more attractive capital return yield than any other in Europe, with 83% of banks beating pre-tax profit expectations in the second quarter.
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