Alvarez & Marsal: German and European Bank Valuations Rose in 2025
Alvarez & Marsal's analysis shows that European and German banks significantly outperformed the broader market in the first half of 2025, driven by factors including interest rate cuts and strong earnings.
Alvarez & Marsal, a global consulting firm, released its latest 'Valuation Insights' report in June 2026, detailing the valuation trends for German and European banks up to September 2025. The report highlights a strong performance period for the banking sector, with shareholder returns significantly outpacing the wider equity market.
European banks achieved a total shareholder return of 26.7%, while German banks saw an even higher return of 46.6%. These gains were attributed to European Central Bank (ECB) rate cuts, robust first-half financial results, and successful stress test outcomes, which collectively boosted investor confidence.
The report noted that price-to-book (P/B) ratios reached record highs, standing at 1.37x for European banks and 0.95x for German banks. Concurrently, the implied cost of equity decreased to 11.5% for European institutions and 10.5% for their German counterparts. Notably, German banks' price-to-earnings (P/E) ratios surpassed those of their European peers for the first time since December 2020, reflecting substantial cost reductions and capital structure improvements at major German financial institutions.
In addition to trading multiples, the report also examined mergers and acquisitions. During the first nine months of 2025, European banking deal volume reached €37.1 billion. The multiples commanded in these transactions, based on P/B ratios, were 13% higher than those of comparable publicly traded banks.