- september 2026
Europe’s largest banks are currently publishing their quarterly results. Markets are scrutinizing net interest margins, provisions, the cost of risk, and profitability outlooks, with particular attention to ROE and RONE, as the war in Iran, energy tensions, and uncertainty surrounding interest rates once again disrupt economic scenarios.
According to Goldman Sachs estimates reported by Reuters, European banks’ pre-tax profits could rise by 11% year on year in the second quarter, a remarkable performance in an uncertain environment. But by focusing on what banks have earned, we risk overlooking a far more decisive question: what are they now prepared to finance?
This is not a theoretical question. The European Central Bank’s latest bank lending survey points to a tightening of credit conditions for euro area companies, driven in particular by geopolitical and energy-related risks. The automotive and energy-intensive manufacturing sectors are especially affected. In other words, just as Europe seeks to rebuild its industrial autonomy, its banks are becoming more cautious toward some of the companies that will have to help deliver it.
This caution is understandable. A bank’s role is not to convert every political priority into credit, much less to ignore risk in the name of abstract sovereignty. But the paradox is clear: Europe has never spoken so much about reindustrialization, defense, artificial intelligence, power grids, or critical technologies, yet the capital required to support these ambitions has never been greater.
The Draghi report already estimated that an additional €750 billion to €800 billion of investment would be needed each year to restore European competitiveness. More recent ECB assessments, which notably include rising defense expenditure, now put that requirement at close to €1.2 trillion per year between 2025 and 2031. This shift in scale should change the nature of the banking debate. The question is no longer only whether European institutions are strong enough to absorb the next crisis, but whether they can help finance the next growth cycle.
Strong banks face an economy in doubt
On paper, the sector enters this period with robust fundamentals. At the end of 2025, the large banks supervised by the ECB reported an average return on equity of 9.53%. Their Common Equity Tier 1 ratio stood at around 16.1%, while their liquidity ratio was close to 159%, well above minimum requirements. The past decade of strengthening balance sheets after the financial crisis has paid off: Europe now has better-capitalized, more liquid, and overall, more profitable banks.
A bank may show excellent ratios while favoring the most liquid assets, established companies, or transactions with readily measurable returns. Yet many projects critical to Europe’s autonomy have precisely the opposite characteristics: they are long-term, capital-intensive, technologically uncertain, and sometimes difficult to make profitable in their early years. A semiconductor plant, a gigafactory, a nuclear reactor, a sovereign data network, or a defense-industry supply chain cannot be financed in the same way as a fully leased commercial warehouse.
However, how much profit banks distribute or retain isn’t the main issue. The real issue is whether institutions can use that profitability to take productive risks, improve coordination between financing and investment across Europe, and do so without abandoning prudential discipline.
Strategic financing cannot rely on banks alone
Asking banks to finance everything would be a mistake. They mainly provide debt, whereas emerging technologies and the riskiest industrial projects often need more equity, public guarantees, or risk-sharing. And that is precisely where Europe’s fragmented financial system struggles. Savings are abundant, but the fragmentation makes it hard to channel them toward growing companies and strategic infrastructure.
The priority is not to impose an administrative list of sectors that banks must support but to build mechanisms that allow them to finance long-term projects without bearing the risks alone. Their business models and regulatory restraints do not reasonably allow them to do so. European guarantees, cross-border syndicated loans, securitization of industrial portfolios, co-financing with the EIB, and mobilizing long-term savings must become standard instruments of economic policy, rather than exceptional arrangements reserved for periods of crisis.
After the results, ask about the choices
Quarterly publications should also provide greater transparency about future directions and choices. Banks communicate extensively about their capital ratios, ROE and RONE, profitability targets, and shareholder distributions. They should also be asked more directly about their long-term financing and investments: what share of new lending supports industrial modernization, energy infrastructure, critical technologies, or the growth of exporting SMEs? What is preventing these volumes from increasing? Which risks should be shared with public-sector stakeholders?
The aim is not to turn bankers into central planners, but to recognize that banks’ credit allocation is never economically neutral. It helps determine which factories will be built, which innovations will reach industrial scale, and which companies will remain European as they grow.
Investors are right to examine the results published this summer. Profitability, liquidity, and risk control remain essential. But Europe will not win the competitiveness battle by merely admiring the strength of its balance sheets. A truly strong bank is not only one that can withstand crises. It is also one that knows how to finance and invest. That requires banks to evolve their risk appetite, coordinate more effectively, and, where appropriate, even consolidate to better support Europe’s long-term economic needs.
