European bank stocks posted their best first-half growth in 27 years. Who are in the lead?

The Stoxx 600 index of European banks added 29% in the first half of the year - the best result for it in 27 years. The leaders of the rally were credit organizations from the largest economies of the European Union: French Societe Generale, German Commerzbank, Spanish Santander and Italian UniCredit. They were helped by record profits, a wave of mergers and acquisitions and investor interest in European assets. The situation is reinforced by the growth of the euro against the background of a weakening dollar and expectations of a soft policy of the Federal Reserve System.

Europe's Stoxx 600 Banks Index rose 29% in the first half of 2025, the strongest performance since 1997, Bloomberg reported. Banks proved to be the most profitable sector in Europe over the period, with investors actively investing in their securities due to high yields and steady profits. An increase in the number of deals solidified the trend, especially in Italy, the agency noted.

- Shares in French bank Societe Generale SA have risen 79% since the start of the year and are now trading close to the highs reached in 2017. That was helped by CEO Slawomir Krupa's reorganization plan: focusing on exiting non-core businesses, strengthening the balance sheet, raising profitability targets and paying out to shareholders, Bloomberg notes. Analysts at Banco Santander in June named SocGen their preferred French bank, noting its potential for positive surprises thanks to cost-cutting measures. 

- German bank Commerzbank is also among the leaders of growth in this half of the year - plus 70% since the beginning of the year. Its market capitalization in May for the first time exceeded €30 billion. The multi-year rally in the bank's shares was driven by rising profits and interest from potential buyers, Bloomberg writes.

Commerzbank's share price has more than doubled since September 2024, when Italian bank UniCredit acquired a stake in it and allowed the possibility of a full merger. However, in June 2025, the Italian bank's CEO Andrea Orchel effectively excluded the move, saying such a deal would not add value given the German bank's rising shares.

- One of the highlights of a successful first half of the year was the rise of Spain's Banco Santander. Its shares rose 57% in the first half of the year, allowing it to overtake UBS in capitalization and become continental Europe's most expensive lender, Bloomberg noted.

- Shares of another German bank, Deutsche Bank, rose 51% in the first half of the year as it increased payouts to shareholders and is poised to benefit from the German government's massive fiscal stimulus measures, Bloomberg writes. But concerns over the disclosure of information about its capital adequacy ratio put pressure on the securities on July 1, with their price dropping by nearly 6% in trading from a high a day earlier.

- Italian lenders are now experiencing a wave of deals that could change the face of the country's financial sector, Bloomberg writes. After tidying up their balance sheets, some market participants are again targeting mergers and acquisitions. Rising profits from rising interest rates have driven stock prices higher. For example, UniCredit shares rose 48% in the first half of the year amid talks to buy Italian rival Banco BPM and at the same time divestiture of its stake in a Greek bank. In May, the bank's market capitalization exceeded that of rival Intesa Sanpaolo, making UniCredit Italy's largest lender by that measure. Its peers Mediobanca and Banca Generali recently hit new all-time highs.

Banks' record rally coincided with a strengthening euro, which is also performing impressively amid dollar weakening and expectations of monetary policy easing by the U.S. Federal Reserve. The European currency is close to its longest streak of outperformance over the dollar in two decades, with options traders betting the rally isn't over yet, notes Bloomberg. 

The euro rose 0.4 percent on Tuesday, July 1, to $1.1829, the highest since September 2021 and marking a gain of about 14 percent since the start of the year. 

Strategists at Societe Generale SA, including Keith Jaques, expect the single currency to peak around $1.25 in the medium term, even as it lags behind the yen and some Asian peers in the second half of the year, Bloomberg writes.

This article was AI-translated and verified by a human editor