European banks are set to deliver another record year of earnings in 2026, with profits expected to continue rising through 2027 and 2028 despite the conflict in Iran and renewed inflationary pressures, according to Bank of America estimates
Our analysis
The banking sector continues to benefit from several favorable drivers.
First, higher interest rates allow banks to reinvest – or "roll over" – their bond portfolios and interest-rate swaps at higher yields, generating additional Net Interest Income (NII) independently of customer-related commercial activity.
In addition, loan-volume growth is accelerating across Europe, driven primarily by corporate demand to finance capex, while household lending is also increasing.
Finally, with corporate and household leverage remaining at historically low levels for nearly two decades, loan growth remains healthy without compromising asset quality, allowing banks to maintain a low cost of risk.
Taken together, these factors support the sector's continued improvement in profitability.
Written on September 25, 2026. Opinions are subject to change. The data used in this document comes from external sources and is used in good faith, but no guarantee can be given as to its accuracy. This document is provided for informational purposes only. The analyses and/or descriptions contained in this document should not be considered as an investment advice from Lazard Frères Gestion SAS, nor a recommendation to buy or sell. This document is the intellectual property of Lazard Frères Gestion SAS. LAZARD FRERES GESTION S.A.S. - 25, RUE DE COURCELLES - 75008 PARIS
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