Three big stories have shaken the corporate world this year: ructions in private credit and asset-backed lending, fears about the impact of artificial intelligence, and war in the Middle East. Europe’s banks managed to get hit by all three.
Santander, Unicredit and their peers entered 2026 with valuations at their highest levels in more than a decade, so it is perhaps no surprise the sector has had a rough few months. The Stoxx 600 sub-index that tracks the continent’s largest lenders has dropped 6 per cent year to date, compared with a 1 per cent decline in the broader index.
Worry number one is private credit. Lending to financial companies other than banks has contributed around a quarter of sector-wide loan growth in 2025, according to analysts at Keefe, Bruyette & Woods. A series of high-profile failures highlighted underwriting weaknesses and a lack of transparency makes it hard to fully gauge the scale of banks’ exposure. The European Central Bank and Bank of England have warned that data is patchy, where it exists at all.