UBS maintains a positive view on the European banking sector, estimating that attractive valuations, the acceleration of credit expansion, the path of interest rates and the steeper yield curve create room for upward revisions to earnings forecasts in the coming months.
UBS analysts forecast EPS growth by 13% in 2026, 15% in 2027 and 10% in 2028. At the same time, they estimate that the return of the ECB rate to 2.5%, versus a previous estimate of 2%, combined with the increase in private sector borrowing, could lead to higher earnings estimates, more M&A deals and ultimately to a re-rating of the sector.
Of particular interest are the so-called “idiosyncratic” picks, namely banks where the investment case is based more on the specific characteristics of each company. Among these, investors mention ABN Amro, Bawag, BCP, Raiffeisen, Piraeus, Santander and Standard Chartered.
Finally, UBS points out that in the event of more intense stagflation, investors may turn to markets with greater exposure to floating rates, with Greece being its preferred market, followed by Italy, Ireland, Spain and Portugal.