While Federal Reserve officials debate (and debate) whether to raise interest rates in September, their counterparts at the European Central Bank have already gone full Leroy Jenkins. The ECB’s Governing Council raised each of its three benchmark rates by 25 basis points during its June meeting for the first time since 2023, and then hiked again to 2.5% on Sept. 10 after a hold in July. The ECB is the only major Western central bank to hike in the current cycle, and leadership argues the hikes are necessary to curb rising inflation expectations driven by the Iran War energy shock.
A hiking cycle during a supply shock carries credit risks that one in a demand-driven shock does not, and investors should be aware of that specter hanging over the banking sector. But the Euro Stoxx Bank index has doubled over the last two years, and many of Europe’s largest banks are increasing 2026 net interest income (NII) guidance in response to higher projected rates. Who benefits most? Eurozone banks with floating-rate loans and deposit beta, and the following three firms are well-positioned to profit from an ECB hiking cycle.
