Al boom to supercharge European banks' rally

After a stellar 2025, investors expect shares in European banks to keep heading higher in 2026, supported by strong earnings and, crucially, cost savings stemming from artificial intelligence.

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As fears of a recession and interest rate cuts from the European Central Bank have subsided, investors have turned even more positive towards European banks, revising up their expectations for the sector, despite a complicated backdrop.

Meanwhile, Al has emerged as a new force drawing investors to European lenders' shares, partly because a dearth of technology companies in the region has forced many to hunt for AI beneficiaries in old-economy markets.

Banks have started to use Al to improve operational efficiency and fraud detection, as well as to reduce staff costs.

"European banks could be a real beneficiary of AI," said Helen Jewell, chief investment officer for fundamental equities at BlackRock, the world’s largest asset manager, with about $12 trillion under management.