Chart of the Week
Since the beginning of the year, the banking sector has achieved strong performance. As of September 11, the Euro Stoxx Banks index was up 59.22% YTD (excluding dividends), making it the top-performing sector in the European stock market in 2025.
Despite this impressive gain, bank valuation ratios remain moderate. The price/earnings (P/E) ratio of the Euro Stoxx Banks index is still around 10x, meaning that the market capitalization of European banks is, on average, ten times their projected 12-month earnings. This level is consistent with the average over the past decade.
OUR ANALYSIS
It is interesting to note that over the past three years, the banking sector’s growth has been driven mainly by improved earnings rather than a rise in its valuation multiples. With a P/E ratio of 10x, the banking sector remains one of the least valued on the market, with the average for MSCI Europe index stocks currently standing at 15x.
The environment also remains very favorable for the banking sector. Earnings momentum continues to be positive, supported by the prospect of interest rates stabilizing at relatively high levels compared to the 2015–2021 period. The sector’s efforts to strengthen the regulatory framework are also coming to an end after 15 years of increased requirements, which have led to a significant improvement in bank balance sheets.
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Written on September 12 2025. Opinions subject to change.
See also: France: A Familiar Unknown to the Markets
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