European bank stocks recorded their strongest year on record in 2025, driven by resilient economic growth, high profit margins, and robust capital returns. Investors are now focusing on earnings growth, efficiency improvements, and sustained shareholder payouts as the sector enters 2026.

The EURO STOXX Banks Index surged 76 percent year-to-date as of December 12, surpassing the previous record gain of 74 percent in 1997. Every constituent of the index posted positive returns, with several banks achieving triple-digit gains. Notable performers include Société Générale and Commerzbank, which rose 139 percent and 136 percent respectively. Spain’s Banco Santander climbed 110 percent, while ABN Amro increased 102 percent. Other strong performers included BBVA (+101%), CaixaBank (+96%), Deutsche Bank (+92%), Bankinter (+86%), and Bank of Ireland (+84%).

Analysts attribute the rally to a combination of favourable macroeconomic conditions. Interest rates remained high enough to support net interest margins, economic growth stayed strong enough to protect asset quality, and banks maintained capital buffers that allowed generous shareholder distributions. The European Central Bank paused its rate-cutting cycle in June 2025, keeping the deposit facility rate at 2 percent. While below the peaks of 2023–24, these levels were above pre-pandemic norms, helping lenders preserve elevated margins.

Economic performance across the eurozone exceeded expectations. Germany avoided a deep industrial recession, southern Europe benefited from strong tourism and EU investment flows, and fiscal policy remained mildly supportive. Credit conditions held steady, loan losses stayed contained, and investor confidence in bank balance sheets strengthened. Strong capital levels allowed banks to increase dividends, share buybacks, and other forms of shareholder returns.

Valuations also contributed to the rally. European banks began 2025 trading at substantial discounts to book value and global peers, reflecting years of negative interest rates, heavy regulation, and subdued profitability. Global portfolio flows further supported the sector, with international investors rotating into European value stocks and financials, aided by a stronger euro.

Looking ahead to 2026, analysts remain broadly optimistic. Goldman Sachs analyst Chris Hallam said investor attention is likely to shift from interest rates and credit to growth and efficiency. He expects ongoing deposit inflows, deposit-focused strategies, and gradual loan growth to drive earnings. Returns are projected to remain in the mid-teens over the medium term, supported by well-capitalised banks capable of deploying capital through organic growth, selective mergers and acquisitions, and shareholder distributions.

Goldman Sachs highlighted high-conviction European bank stocks with potential upside, including UBS Group (34%), UniCredit (29%), Banco BPM (29%), Julius Baer (25%), Alpha Bank (21%), and KBC Group (21%). Analysts suggest that, even after a historic 2025, the sector’s rally may not yet be complete.

After a record-breaking year, European banks are entering 2026 not just as a recovery story but as a sector increasingly evaluated on growth execution, efficiency gains, and disciplined capital management.

New data shows a growing number of Europeans are unable to keep their homes adequately warm, signalling a deepening social challenge that has persisted since the energy shock triggered by Russia’s invasion of Ukraine. Despite housing being recognised as a basic social right, the crisis now affects tens of millions of residents across the continent.

Eurostat figures reveal that more than 41 million people in the European Union — equal to 9.2% of the population — could not afford sufficient heating in 2024. Nearly two-thirds of those affected live in the EU’s four largest economies, underscoring the widespread nature of the problem even in wealthier member states.

Living in a cold home carries well-documented health risks. Research links low indoor temperatures to higher rates of respiratory infections, strokes and accidents caused by reduced physical dexterity. While the percentages vary significantly from country to country, the scale becomes stark when converted into actual population numbers.

Euronews Business used the EU’s January 2024 population data to estimate the number of people affected. Finland records the lowest share at 2.7%, while Bulgaria and Greece sit at the top with around 19% of residents unable to heat their homes properly.

When candidate countries and EFTA states are included, the range becomes wider. Switzerland reports the lowest share at 0.7%, while Albania stands out at 33.8%. North Macedonia also reports high levels, with more than 30% of its population struggling to maintain adequate indoor warmth. In EU and neighbouring states, the rate exceeds 10% in Lithuania, Spain, Portugal, Turkey, Cyprus, Montenegro, France and Romania.

Turkey records the largest number of people affected among the 36 countries monitored. Around 12.9 million residents were unable to heat their homes in 2024, even though the country has some of the lowest gas and electricity prices across Europe based on Eurostat measurements. Spain follows with an estimated 8.5 million people, and France records roughly 8.1 million. Germany has around 5.3 million residents in this category, while Italy has 5.1 million.

Experts describe fuel poverty as a condition in which households limit energy use to the point that health and wellbeing are compromised. The European Commission identifies three central drivers: high energy expenditure as a share of income, low household income and poorly insulated buildings.

The Commission says the strain on households intensified after the COVID-19 pandemic and the surge in energy prices following the outbreak of war in Ukraine in 2022. While the share of people unable to heat their homes had been falling for much of the past decade, it rose again after the crisis. A slight improvement was recorded last year.

Officials attribute the recent progress to falling retail prices for electricity and gas, along with national investments in energy efficiency and stronger policymaking around energy poverty.

Euronews Business recently analysed energy costs across Europe, outlining which countries face the highest and lowest electricity and gas prices when measured in both euro terms and purchasing power standards.

The global oil market is set to enter 2026 with a comfortable surplus that is expected to weigh on prices, even as analysts warn of deeper structural challenges looming later in the decade. New projections from Oxford Economics indicate Brent crude could finish 2026 at around $58 per barrel and ease to roughly $55 in 2027, well below prevailing market expectations. The forecasts are anchored in a sustained supply surplus projected to exceed 2 million barrels per day.

Global production is expected to rise by about 1.6 million barrels per day next year, bringing total output to around 106 million barrels per day. Demand is forecast to increase at a slower pace, climbing to 104 million barrels per day in 2026. The supply outlook has been lifted by stronger US shale performance and faster progress on major developments in Brazil. Despite lower rig numbers and expectations of West Texas Intermediate trading below $55, improvements in drilling efficiency are allowing US production to grow by approximately 400,000 barrels per day.

Latin America continues to play an important role in the supply picture. Brazil and Guyana are set to add a combined 1.6 million barrels per day across 2025 and 2026. OPEC is projected to restore nearly 1 million barrels per day in the second half of 2026 as key members, including Saudi Arabia and the UAE, start trimming back voluntary cuts.

On the demand side, growth is expected to slow to around 600,000 barrels per day next year, led mainly by emerging markets and OPEC economies. Consumption in advanced economies is forecast to level off due to efficiency improvements and rising electrification. China remains a central driver, supported by manufacturing and petrochemical activity, while demand in the United States is expected to decline structurally.

Against this backdrop of near-term abundance, some analysts are drawing attention to risks that could arise in the next decade. Ole Hansen, Head of Commodity Strategy at Saxo Bank, said current prices may not support the level of upstream investment needed to offset natural declines in existing fields. He noted global fields lose between 6 million and 8 million barrels per day each year, requiring roughly $500 billion in annual investment just to maintain today’s output levels.

Hansen warned that the industry may face a supply shortfall early in the 2030s if investment continues to lag. He pointed out that Saudi Arabia and the UAE remain the only major producers with meaningful spare capacity, while US shale growth is showing signs of slowing.

The International Energy Agency recently revised its long-term outlook, now projecting oil demand to grow well beyond 2040. The shift heightens concerns that delays in investment could lead to sharper price increases later.

Analysts say risks to the 2026 outlook cut both ways. A faster slowdown in US shale, renewed OPEC restraint or geopolitical disruptions could push prices higher, while a larger-than-expected surplus early next year could trigger steeper price drops.

Despite the near-term softness, the debate over long-term supply needs is intensifying. Some analysts warn that postponing investment today could set the stage for tighter markets later in the decade.