Tweaking half-time tactics: European Financials 2H26 Outlook

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Tweaking half-time tactics: European Financials 2H26 Outlook

J P M O R G A N Europe Credit Research

17 June 2026

Tweaking half-time tactics

European Financials 2H26 Outlook

European Financials enter 2H26 with robust fundamentals, despite macro Europe Corporate Credit - Banking &

disruptions and geopolitical shocks. 1Q saw strong pre-provisioning results Financial Services (IG)

supported by buoyant trading, fee income and cost delivery, helping offset Gareth Davies, CFA AC

emerging provisioning needs. The sector also looks set to incrementally benefit (44-20) 3493 0672

from a higher-for-longer rates backdrop, through improved NII expectations. gareth.davies@jpmorgan.com

However, we highlight three potential “curveballs” (2026 Outlook: Sunny with a Drishti Sharma, CFA AC

chance of curveballs) which could episodically challenge sentiment and constrain (44-20) 7134-0278

further outperformance of subordinated risk after a strong 1H26: private credit, drishti.sharma@jpmorgan.com

J.P. Morgan Securities plc

commercial real estate and geopolitics/sovereign risk. We accordingly set out the

following recommendations:

• AT1 (Neutral): Outperformance unlikely to repeat itself in 2H, with JPM recommendations summary

relative carry eroded and “grandfathering” not a guaranteed catalyst for JPM Recommendation

2H performance. After a strong 1H, we remain tactically neutral on both € and Debt Tranche Prior New

$ AT1 (€AT1 unch; $AT1 previously UW), seeing less compelling risk-reward €AT1 N N

versus Tier 2 and HY BB. We think extension risk premia for the asset class as Tier 1 $AT1 UW N

a whole can temporarily remain at current lows, but recommend a focus on RT1 N OW

mid-reset, mid-distance buckets within the asset class. We caution that any Tier 2 Bank T2 OW N