UBS loses crown as continental Europe’s most useful financial institution to Santander

Spanish lender Banco Santander has eclipsed Swiss large UBS as continental Europe’s largest financial institution by market capitalization, as U.S. tariffs ripple by means of the area’s bruised banking sector.

UBS — whose share took a deep tumble after the April 2 announcement of U.S. President Donald Trump’s baseline and reciprocal duties on Washington’s commerce counterparties — had a market cap of 79.5 Swiss francs ($97.23 billion) as of the Wednesday shut, in accordance with FactSet information, with Banco Santander at 91.3 billion euros ($103.78 billion).

The 2 banks’ shares have diverged over latest months, with the Swiss lender shedding 17.2% within the yr up to now, whereas Banco Santander has gained practically 35%, in accordance with LSEG information.

Each banks, together with Europe’s broader banking sector, have suffered for the reason that imposition of the White Home’s protectionist commerce insurance policies, given the shrinking progress outlook for tariff-struck European international locations and the prospect of a recession within the U.S.

Washington imposed 20% tariffs on imports from the European Union, however has lowered them to 10% underneath a 90-day pause introduced by Trump on April 9.

Switzerland — which isn’t a member of the EU — faces a steeper 31% levy after the pause lifts and the Trump administration has additionally threatened further duties on imported medicine. This might ship a blow to the Swiss pharmaceutical business that “grew robustly” within the fourth quarter and “contributed considerably” to the nation’s exports over the interval.

Extra broadly, European Union banks obtained a lift from the announcement of the European Union’s ReArm initiative in March, which is ready to loosen regional fiscal guidelines and set off additional borrowing exercise to spice up protection spending.

Continental Europe’s two largest lenders have very completely different exposures to the U.S. market.

Banco Santander is the fifth-largest auto lender within the nation and is increasing by means of a latest partnership with telecom large Verizon. Nonetheless, it solely logged round 9% of its complete income for 2024 Stateside.

The U.S. is, in the meantime, a key marketplace for UBS’ profitable core international wealth administration division, with roughly half of the Swiss lender’s invested belongings concentrated within the broader Americas area final yr, in accordance with its annual report.

UBS’ outlook has additionally been clouded by a shroud of uncertainty surrounding potential new — and steeper — capital necessities from Swiss authorities. This follows its enlargement within the wake of absorbing collapsed home peer Credit score Suisse, from which it additionally inherited a major U.S. presence. The lender expects to obtain additional readability on these tips subsequent month.  

UBS’ profitability may be impacted by a powerful Swiss franc — traditionally a secure haven asset throughout market turmoil — which has appreciated by roughly 8% in opposition to the U.S. greenback for the reason that imposition of the most recent tariffs.

Switzerland’s appreciating forex — whose energy native commerce teams had flagged as damaging to exports even earlier than tariffs got here into impact — may, together with depressed inflation within the nation, see the Swiss Nationwide Financial institution make additional defensive cuts to rates of interest, which have been already diminished to simply 0.25% in March.

As compared, the European Central Financial institution can also be broadly anticipated to trim its key deposit facility fee by 1 / 4 level when it meets afterward Thursday, though this may take it to 2.25%.

The potential rate of interest minimize would happen after the ECB mentioned in March that its financial coverage was “turning into meaningfully much less restrictive” — in a sign some analysts interpreted as indicating restraint relating to reducing charges additional.

Declines in nationwide rates of interest usually weigh on native lenders’ internet curiosity revenue revenues from loans.