Yahoo Finance·2025-12-15 05:02Core Viewpoint - Investors are optimistic about European banks' shares in 2026, driven by strong earnings and cost savings from artificial intelligence, as fears of recession and interest rate cuts have diminished [1][4]. Group 1: AI Impact on European Banks - AI is becoming a significant factor attracting investors to European banks, as the lack of technology companies in the region leads to a search for AI beneficiaries in traditional markets [2]. - Banks are leveraging AI to enhance operational efficiency, improve fraud detection, and reduce staffing costs [2][3]. - BlackRock's chief investment officer highlighted that European banks could benefit from AI not only in revenue but also in cost savings [3]. Group 2: Market Performance and Valuation - European bank stocks have seen substantial gains, with Societe Generale up 140%, Commerzbank 125%, and Barclays nearly 70% this year, while the European bank stock index has risen over 60% [6]. - European bank stocks are perceived as relatively cheap, trading at approximately 1.17 times their price-to-book value, which is about 40% lower than their 2007 peak and below the 1.7 times of U.S. banking shares [7]. Group 3: Earnings and Cost Expectations - Goldman Sachs projects that costs for European banks will grow at a compound annual rate of only 1% from 2025 to 2027, with cost/income ratios expected to improve by 130 basis points year on year [8].