Three of Europe’s largest banks reported record or above-forecast profits for the first quarter of 2025, as trading volatility linked to the Iran conflict boosted revenues. The results, released on Wednesday, also highlighted growing caution among executives about the longer-term economic impact of the Middle East conflict, including rising energy prices and uncertainty over interest rates.
Germany’s largest lender, Deutsche Bank, posted a record post-tax profit of €2.2bn, up 8% year on year. Pre-tax profit rose 7% to €3bn, driven by a 39% jump in its private bank division to €681m. Net revenues increased 2% to €8.7bn, while assets under management climbed to €1.8tr, supported by €22bn in net inflows. Chief executive Christian Sewing said the quarter gave the bank “a great start to the next phase of our strategy,” adding that it had the balance sheet strength to serve clients in a dynamic environment. CFO Raja Akram pointed to AI and process reengineering as key drivers of cost flexibility. However, provisions for credit losses rose 10% to €519m, reflecting broader uncertainty. The bank maintained its full-year revenue target of about €33bn and said a €1bn buyback is underway. Its shares fell nearly 3% in Europe after the update.
Banco Santander, continental Europe’s largest lender by market capitalisation, also reported record attributable profit of €5.5bn, up 60%, boosted by a €1.9bn gain from the sale of Santander Bank Polska. Underlying profit rose about 12% to €3.6bn, with revenue up 4% to €15.1bn, driven by net interest income and a 6% increase in fees. Costs fell 3%, improving efficiency. The bank’s CET1 capital ratio rose to 14.4%, giving ample buffer to absorb potential stress. Santander confirmed a €5bn buyback underway and a target of at least €10bn in buybacks over 2025–26. One note of caution came via its Openbank division, where underlying profit fell 38% to €290m, hit by a €207m provision related to potential motor finance complaints in the UK and the end of US tax incentives for electric vehicles. The bank said profit before tax would have risen 15% excluding that provision.
UBS reported an 80% rise in first-quarter net income to $3.04bn, driven by wealth management and trading strength. Revenue rose to CHF13.6bn (€14.7bn), while underlying pre-tax profit increased 54%. The bank confirmed a $3bn buyback programme targeted for completion by end-Q2 and reported a CET1 ratio of 13.8%. Executives said the Iran conflict’s economic impact remains manageable if short-lived, though duration is a key risk.
The results come amid heightened economic and geopolitical uncertainty. The Middle East conflict, which erupted in late February, pushed eurozone inflation to 2.5% in March and reinforced expectations of ECB rate hikes for the first time in years — a shift that supports net interest margins in the near term but raises longer-term credit risk as energy costs filter through to households and companies. The ECB has warned that the war has triggered a downward revision to the short-term growth outlook, as energy price shocks and rising uncertainty are likely to hit purchasing power and business confidence, while also increasing financing costs for banks and firms via bond spreads and equity prices. For now, bank earnings appear resilient — but analysts are watching credit quality closely as the macro picture evolves.
TotalEnergies and Mercedes-Benz: Diverging fortunes
French multinational oil company TotalEnergies reported a 51% rise in net income to $5.8bn (€4.95bn), supported by strong oil and gas prices and tighter global markets. “TotalEnergies posted a strong set of first-quarter results… ahead of expectations,” said Maurizio Carulli of Quilter Cheviot, adding that “robust organic production growth is helping offset losses in the Middle East linked to the ongoing conflict.” Production rose about 4% year on year, with similar growth expected in Q2, excluding disruption. The company announced a 5.9% dividend increase and a $1.5bn share buyback for Q2 2026, at the top end of guidance. It expects oil prices to remain elevated into Q2 due to delayed production restarts, while gas markets stay tight, with European prices at $14–15 per MMBtu supported by low storage and LNG competition between Europe and Asia.
At the same time, German car maker Mercedes-Benz reported a sharp 17% drop in operating profit to €1.9bn for the first quarter, with revenue falling 4.9% to €31.6bn. The adjusted operating margin in the cars division slid to 4.1% from 7.3% a year earlier, and net profit fell 17% to €1.43bn. The German carmaker is being squeezed from multiple directions, including a 27% collapse in sales in China, where lower-cost local rivals, including BYD and Nio, are pushing into the premium segment, as well as US tariff pressure and the costly transition to electric vehicles. Despite the slump, the numbers beat analyst expectations of €1.6bn in operating profit, and shares were indicated 2.2% higher in pre-market trading.
The contrasting results underscore the uneven impact of the Iran conflict on European sectors. While banks and energy companies benefit from volatility and higher commodity prices, manufacturers face headwinds from disrupted supply chains, weaker demand in key markets like China, and rising costs. For a broader perspective on how the conflict is reshaping corporate earnings, see our analysis of BP and Barclays results. Meanwhile, the ECB’s response to inflation and interest rate expectations is being closely watched, as discussed in AI Forces Central Banks to Rethink Inflation and Interest Rate Strategies.
