Europe’s Banking Boom – Outshining AI and Leading a Financial Revolution
7 JUL, 2025
By Alexis Bienvenu
Since the beginning of the year, Société Générale has risen by 81%. This is just one example of the impressive trajectory seen among banks across the region, which have advanced 43% during the same period, far ahead of the AI stars, whose returns are modest in comparison (Nvidia, for example: +12% in dollars). Some institutions are particularly dazzling; Unicredit, currently the second-largest listed bank in the eurozone by market capitalisation, has skyrocketed by more than 500% over three years!
The explanation does not lie in the economic activity of the eurozone, which unfortunately remains sluggish. Beyond some unique trajectories, such as that of Unicredit, this phenomenon can be attributed to several structural causes that suggest a sustainable trend.
Firstly, the yield curve has normalised. Thanks to the decline in inflation and, subsequently, in benchmark interest rates, the curve has returned to a normal shape in which short-term rates are clearly lower than long-term rates, whereas the opposite was true in 2023, when the 2-year German bond was almost 80 basis points above the 10-year bond. In this environment, banks—which essentially borrow short-term to lend long-term—could not thrive. That adverse period has now passed, and no new inflationary wave appears on the horizon.
Other factors may also have contributed to this renewed boom in banks: increased fees on transactions, for instance, or less stringent regulations. Also, the anticipated recovery of their stock valuations, which had long been ridiculously low.
However, beneath the surface lies an even more powerful movement: the strengthening of the quest for European sovereignty. In response to growing global fragmentation—abandoned by its western ally and dangerously pressured by its large eastern neighbour—Europe has awakened to the need to assert its sovereignty across various domains: militarily, of course, but also commercially and now financially. In this spirit, the European Commission is working on an ambitious transformative project for European finance: the strategy known as the “Savings and Investment Union,”presented in March 2025.
This Union aims to create a single, efficient market for financing economic projects within the European Union. The underlying idea is that the eurozone’s savings are abundant but underutilised. Each year, €1 trillion is saved, but a large portion of this capital flees Europe, mostly to invest in US debt or low-risk European assets, which yield low returns and offer little productive value. Redirected through effective frameworks, several hundred billion euros could be invested annually in a way that more effectively fuels Europe’s momentum—not only militarily, but also ecologically and digitally.
The development paths are many, often reflecting the US model, where project financing is more fluid. Among the priorities is the development of cross-border venture capital funds to support innovative companies at the European level. Another focuses directly on banks and markets, aiming to boost the process of loan securitisation. For a bank, this involves pooling various loans into a single vehicle, which is then sold in different tranches to investors. This way, the bank can lighten its balance sheet and thus free up capital to grant new loans. This process—commonplace in the US—still carries an air of mystery in Europe, to the detriment of its capacity to support innovation. Other more original proposals are also being considered, such as the creation of a unified European public debt market, no longer just national, which could attract some of the capital currently invested in US debt.
This Union project is not just another regulatory evolution—it also represents an ideological revolution. Banks and, more broadly, capital markets, are now seen as genuine tools of sovereignty, not just prosperity; after all, one cannot exist without the other. A decade from now, Europe’s banking and stock markets will likely be much stronger, and therefore, Europe more autonomous. Long live the European financial revolution!
