zeb.market.flash #56: The stock rally continues, but the problems remain
Our overview of current developments in the global banking market
And here is what this issue is all about:
Strong stock markets more than offset Q1 losses
- Following losses in the first quarter of 2026 due to the war in the Middle East and the de facto closure of the Strait of Hormuz, total shareholder returns re bounded overall in Q2 2026 (MSCI World: +14.8% QoQ) - mainly driven by the technology and telecommunications sectors.
- Global banks followed the market trend and achieved a total shareholder return of +13.1% QoQ. European banks in particular posted significant gains (+24.8% QoQ). Strong quarterly earnings and the ECB’s somewhat surprising interest rate hike in June were the main drivers.
Resilient earnings in a volatile environment
- Banks in Western Europe and the US got off to a strong start in 2026 and con tinued to increase their profitability. Western European institutions increased their ROE to 13.4% (+0.8 pp YoY), while US banks increased theirs to 13.7% (+1.5 pp YoY). This development was driven by solid earnings growth in both regions. In Western Europe, non-interest income grew more rapidly than net in terest income, pointing to a more diversified revenue base; the ECB rate hike should provide additional support to European interest income.
- At the same time, the environment remains challenging: the war-induced en ergy price shock is adding inflationary and monetary policy pressure, while the growth outlook remains fragile, especially in Germany and Western Europe.
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