“We still believe there is more to go, as we move from a normalisation of earnings to a cyclical recovery with acceleration of both loan growth and fees,” wrote the team including Alvaro Serrano and Giulia Aurora Miotto.
Euro-area banks have risen for 11 out of 12 last quarters, buoyed by resilient earnings and shareholder payouts. Societe Generale SA and Commerzbank AG shares have more than doubled in 2025.
Barclays Plc, Santander SA, Societe Generale and ING Groep NV are among Morgan Stanley analysts’ top picks.
See also: Hyundai’s Chung warns tough year ahead for global auto industry
Despite the rally, European banks are trading at a 12-month forward price-to-earnings ratio below 10, making them the cheapest sector in Europe after autos. In fact, all the gains in the sector over the past five years have solely been driven by earnings growth, with stock prices only playing catch up to surging estimates.
Attractive valuations are keeping other analysts bullish on the sector. KBW reiterated its overweight recommendation for European banks earlier this month, saying the stocks are inexpensive compared to the broader market.
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