Barclays research notes that despite a 14% YTD drop in the SX7P index, European banks' earnings remain manageable.
A 50‑basis‑point rate rise adds ~3% to average pre‑tax profit, while a 10% rise in loan‑loss provisions cuts profit by only ~1%.
Barclays projects median bank pre‑tax profit could fall 5% under a base downside scenario, up to 14% in a severe stress case.
Shareholder returns offer a 26% cumulative yield (6% dividend, 2% buyback) 2026‑2028, providing additional buffer for banks.