Analysts at Goldman Sachs project 2024 as a transitional year for the European economy. They anticipate that banks will expand their footprints and that the European Central Bank will commence a gradual easing of rates. Yet the bank notes that the anticipated rate cuts are unlikely to drastically reshape the broader economy in 2025. The implications highlighted in the report focus on higher financial fees, rising operating expenses, and a manageable but meaningful level of credit costs as the base scenario for the year ahead.
Looking further ahead, Goldman Sachs expects a broader reallocation within the sector as economic policy shifts away from peak rates. This environment is forecast to compress return on tangible equity (ROTE) for 2024, even as many institutions in the coverage universe posted stronger annual ROTE figures in 2023. The strategy implied by this shift is a set of compelling investment opportunities that emerge when robust profit and loss results are paired with disciplined capital allocation, potentially driving double-digit earnings per share (EPS) growth and continued ROTE expansion through 2025 to 2027.
In terms of stock market performance, profitability for the European banking sector has outpaced broader European equities, yet the sector remains comparatively inexpensive. This relative cheapness, Goldman Sachs notes, is largely due to ongoing momentum in earnings observed so far this year, which could attract sustained investor interest as macro conditions evolve.
CaixaBank and Santander
Goldman Sachs has initiated coverage of CaixaBank, forecasting a notable uptick in the bank’s market value. The bank’s price target is set at 5.20 euros, among some of the higher figures in Bloomberg consensus estimates, with a neutral rating attached. The firm explains that CaixaBank stands to gain from the current high-rate environment in Europe, benefiting from a larger share of variable-rate lending and efficient management of deposit funding costs. While CaixaBank faces a potential drag as rates move lower, Goldman sees CaixaBank maintaining a resilient ROTE trajectory amid a favorable structural backdrop that supports returning capital in line with other European peers.
Conversely, Santander, which falls under the same coverage umbrella, carries a buy rating with a price target near 5 euros, implying roughly a 30% upside. Goldman argues that Santander’s global footprint enables it to capture growth dynamics in Latin America while also leveraging Europe’s improving productivity and higher rates. The bank’s outlook suggests higher profitability, ongoing capital accumulation, and continued shareholder distributions consistent with the forecast period.
Additional insights suggest that the Group’s ROTE is expected to stay above the mid-teens through 2025. The assessment highlights above-average growth, improving profitability, and stronger capitalization as catalysts for a CET1 ratio rising toward the mid-teens in 2024. A broader distribution strategy is anticipated, with total shareholder distributions rising materially from 2023 levels, and a high return on capital projected in the mid-to-high single digits relative to market value in the 2023–2024 window. Overall, the analysis points to a sector that may deliver durable earnings momentum and disciplined capital deployment as it navigates the evolving rate landscape and the shifting balance of risk and opportunity across Europe and beyond.