The market seems to be getting crowded at the top lately. If you aren't investing in artificial intelligence or AI-related companies, you might feel like you're getting left behind. AI hyperscalers, such as Meta Platforms (NASDAQ:META), Microsoft (NASDAQ:MSFT), and NVIDIA (NASDAQ:NVDA), have dominated headlines for most of the last two years, and their stocks have rewarded investors handsomely.
But the financial sector is also on fire in 2025, and the gains are not coming from the places you'd expect.
In fact, one kind of financial stock has been soaring even more than most AI stocks, and this rally still has ways to go.
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The Big Four banks in the United States – JPMorgan Chase (NYSE:JPM), Goldman Sachs (NYSE:GS), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC) – have each gained at least 13% year-to-date (YTD).
But even these advances have been overshadowed by their European counterparts.
A combination of factors has sent European bank stocks higher, including:
- Robust Earnings Growth – High rates have helped boost European bank margins, resulting in more interest income from loans. And despite recent cuts, interest income has remained strong, as evidenced in Q2 earnings.
- Cheap Valuations – Metrics like Price-to-Earnings (P/E) ratio and Price-to-Book (P/B) value indicate that European banks have more attractive valuations than their counterparts in the U.S. banking sector.
- Capital Recovery – Many European banks lagged in the aftermath of the 2008 financial crisis and the COVID-19 pandemic, but now boast stronger balance sheets. These companies are reporting more share buybacks and dividend raises, which appeal to income-oriented investors.
If recent earnings and stock performance are any indicator, this rally in Eurozone banks still has legs. Here are five stocks making the most of the renewed interest in this sector.
Deutsche Bank
Deutsche Bank (NYSE:DB) has been one of the best-performing financial stocks on the planet so far in 2205. DB shares are up over 110% YTD, including a 22% gain in the last month alone. The firm has taken full advantage of the macro backdrop by maintaining margins, growing revenue (6% YOY growth in Q2), and extending its buyback program. Q2's revenue figure was the fourth consecutive upside surprise, and the 15% YOY decline in non-interest expenses shows Deutsche Bank remains committed to cost-cutting measures.
Technical signals on the daily chart support the fundamental tailwinds. DB shares have traded above their 50-day moving average since the end of Trump's Liberation Day tariffs, and this level has become an area of support during the uptrend. The Moving Average Convergence Divergence (MACD) has also broken out over the last month, with a bullish confirmation as the MACD line bounced off the signal line. DB shares could get overextended following this rally; a return to the 50-day MA could provide a good entry point for new positions.
UBS Group AG
UBS (NYSE:UBS) hasn't yet broken out to the same degree as some of the other European banks on our list, but there are signs it might be ready to play catch-up. UBS is an asset management giant focusing on high-net-worth clients, and its Q2 earnings showed a firm financial picture. UBS reported revenue of $12.11 billion, slightly below analysts' estimates. But the $0.72 EPS figure beat the anticipated $0.64, and the company has already integrated 400,000 clients from its Credit Suisse acquisition.
UBS shares are up 30% YTD, but over 20% of that gain has come in the last three months. Bullish momentum continued to swell in July when the 50-day MA crossed over the 200-day MA, forming a bullish Golden Cross. With a strong uptrend now in place and the Relative Strength Index (RSI) sitting under 70, UBS shares are cleared for takeoff.
Lloyd's Banking Group PLC
U.K. markets have been leaders amongr Euozone indices, and Lloyd's Banking Group (NYSE:LYG) retains an intriguing valuation and strong dividend despite a massive 66% YTD gain. LYG currently yields 3.8% with a dividend payout ratio of just 33%, meaning only 33% of the company's earnings are used to support the dividend (an ideal ratio for a retail bank). The bank's Q2 earnings were also robust, with EPS and revenue easily surpassing analysts' estimates.
Like many of its peers in the sector, the stock has found support at the 50-day MA, indicating strong upward momentum. Despite a gain of nearly 20% in the last three months, the RSI has yet to crest 70, which is the standard threshold for an Overbought signal. Fundamental and technical signals point to more upside ahead for LYG.
Barclays PLC
Barclays (NYSE:BCS) is another U.K.-based bank breaking out to new highs in 2025. In fact, the stock's 54% YTD gain has taken the share price back to its highest level since Q1 of 2011, when Europe was still in the grips of the Financial Crisis aftermath. While the pre-GFC high is still 200% away, Britain's most popular bank has made an impressive turnaround. Both the Q1 2025 and Q2 2025 earnings releases showed top and bottom line beats, with income up 14% YOY in the Q2 filing.
The bullish outlook is confirmed by the chart, which shows upside momentum based on the 50-day and 200-day MAs. Further strengthening the case is a MACD crossover, which is often a precursor for another move higher.
Banco Santander SA
Banco Santander (NYSE:SAN) appeared on one of our previous lists, but we're bringing it back because the uptrend is showing no signs of breaking. SAN shares are up nearly 110% so far this year, and not even a mixed July earnings release (misses on both EPS and revenue) can bring this stock down. Despite missing expectations, the company's first-half revenue figure was its highest on record, and net operating income also grew 5% YOY. The stock trades at just 9.7 times earnings, and yields a 2.66% dividend.
The SAN daily chart boasts a trio of bullish traits. The standard uptrend pattern is in place, with the stock price above the 50-day and 200-day MAs. There's also a bullish crossover on the MACD confirming the upward momentum. An RSI under 70 hints that profit takers are still looking for more gains before cashing out. Thanks to these tailwinds, SAN shares are closing in on the $10 mark for the first time in over a decade.
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