[EARNINGS PREVIEW] UniCredit and Santander to kick off European Bank earnings.

UniCredit to report Q2 and H1’26 earnings on Wednesday 22nd BMO (commonly at 06:00BST)
Santander to report Q2’26 earnings on Wednesday 22nd BMO (typically at 05:45BST)

Overview:

European banks have outperformed the broader STOXX 600 YTD, printing gains of around 15% against the STOXX 600’s 8% gains. In terms of the broader sector performance, Banks is the fourth-ranking sector, behind Energy, Utilities and Technology. This is understandable given the Middle East conflict driving flows into defensive names, while Tech has been supported by AI demand.
Over in the US, many of the big banks reported strong Q2 earnings, with EPS and revenue beats across the board. Equity trading helped boost revenues, but efficiency rates and ROE also improved across the board. This could be a sign of positive European bank earnings.
Analysts see continued positive momentum for European banks, driven by: 1) Continued NII growth given higher interest rates, 2) non-NII revenue boosted by fees generated by investment banking, and 3) efficiency gains. BlackRock’s Jewell also said Financials may provide another source of growth and diversification in portfolios, highlighting that banks may be a big beneficiary of AI adoption.

UniCredit Expectations (EUR):

EPS 2.06 (prev. 2.16 Y/Y)
Revenue 6.53bln (prev. 6.13bln Y/Y)
Net profit 2.75bln (BofA 3.1bln, prev. 3.34bln Y/Y)

Santander Expectations (EUR):

EPS 0.24 (prev. 0.22 Y/Y)
Revenue 15.66bln (prev. 15.47bln Y/Y)
Net profit 3.30bln (prev. 3.43bln Y/Y)

Guidance and Commentary:

Across the broader banking space, Visible Alpha expects aggregate Q2 ROTE of 15.9%, supported by higher NII Q/Q, lower costs and lower impairments.
Specifically, for UniCredit, BofA expects above-consensus net profit figures due to positive deposit flows and stable costs. Analysts at BofA also add that the stock is undervalued given the bank’s capacity to deliver further cost cuts and its potential to return capital to investors.
For Santander, Keefe Bruyette analysts say focus will be on comments related to redundancy plans in Spain, as well as its outlook in the UK and Brazil. Regarding Brazil, the BCB has cut rates at a slower pace due to the Middle East conflict, which would have a negative impact on the pace of lending volumes, according to UBS analysts. Brazil is Santander’s biggest market.
For UK banks, Citi remains constructive on UK bank fundamentals, with NIM expansion and high volume growth. Concerns over UK politics and China regulations have eased, Citi says, which would enable investors to focus on return trajectories..

Season-openers of this kind set the read-through for the rest of the European bank reporting run: the first prints tend to anchor expectations on NII trajectory, fee income and cost discipline, and subsequent reporters are traded against that template rather than on their own consensus alone. The case split that matters is between the NII story and the quality-of-earnings story. With rate cycles past their peak in much of Europe, the question the openers answer is whether net interest income is still growing or merely holding, and whether investment banking fees and cost cuts are doing the heavy lifting instead. US bank results earlier in the season, with trading-led beats, have historically flattered the European complex only where the same revenue mix applies; domestic retail-heavy names diverge quickly. For Santander the transmission runs through its geographic mix, with Brazil the swing factor: a slower local easing cycle supports margins but weighs on loan volumes, and commentary on Spanish restructuring and the UK franchise will be parsed as much as the print. UniCredit's tell is capital return, where the stock has historically reacted more to distribution capacity and cost guidance than to the quarter itself. Worth noting that pre-positioned sector outperformance into the season raises the bar: crowded longs in banks have tended to punish in-line prints and reward only clear beats with guidance upgrades.