UBS loses crown as continental Europe’s most valuable bank to Santander

Spanish lender Banco Santander has eclipsed Swiss giant UBS as continental Europe’s largest bank by market capitalization, as U.S. tariffs ripple through the region’s bruised banking sector.

UBS — whose share took a deep tumble after the April 2 announcement of U.S. President Donald Trump’s baseline and reciprocal duties on Washington’s trade counterparties — had a market cap of 79.5 Swiss francs ($97.23 billion) as of the Wednesday close, according to FactSet data, with Banco Santander at 91.3 billion euros ($103.78 billion).

The two banks’ shares have diverged over recent months, with the Swiss lender shedding 17.2% in the year to date, while Banco Santander has gained nearly 35%, according to LSEG data.

Both banks, along with Europe’s broader banking sector, have suffered since the imposition of the White House’s protectionist trade policies, given the shrinking growth outlook for tariff-struck European countries and the prospect of a recession in the U.S.

Washington imposed 20% tariffs on imports from the European Union, but has lowered them to 10% under a 90-day pause announced by Trump on April 9.

Switzerland — which is not a member of the EU — faces a steeper 31% levy after the pause lifts and the Trump administration has also threatened additional duties on imported drugs. This could deliver a blow to the Swiss pharmaceutical industry that “grew robustly” in the fourth quarter and “contributed significantly” to the country’s exports over the period.

More broadly, European Union banks received a boost from the announcement of the European Union’s ReArm initiative in March, which is set to loosen regional fiscal rules and trigger further borrowing activity to boost defense spending.

Continental Europe’s two largest lenders have very different exposures to the U.S. market.

Banco Santander is the fifth-largest auto lender in the country and is expanding through a recent partnership with telecom giant Verizon. Nevertheless, it only logged around 9% of its total profits for 2024 Stateside.

The U.S. is, meanwhile, a key market for UBS’ lucrative core global wealth management division, with roughly half of the Swiss lender’s invested assets concentrated in the broader Americas region last year, according to its annual report.

UBS’ outlook has also been clouded by a shroud of uncertainty surrounding potential new — and steeper — capital requirements from Swiss authorities. This follows its expansion in the wake of absorbing collapsed domestic peer Credit Suisse, from which it also inherited a significant U.S. presence. The lender expects to receive further clarity on these guidelines next month.  

UBS’ profitability could also be impacted by a strong Swiss franc — historically a safe haven asset during market turmoil — which has appreciated by roughly 8% against the U.S. dollar since the imposition of the latest tariffs.

Switzerland’s appreciating currency — whose strength local trade groups had flagged as damaging to exports even before tariffs came into effect — could, along with depressed inflation in the country, see the Swiss National Bank make further defensive cuts to interest rates, which were already reduced to just 0.25% in March.

In comparison, the European Central Bank is also widely expected to trim its key deposit facility rate by a quarter point when it meets later on Thursday, although this will take it to 2.25%.

The potential interest rate cut would take place after the ECB said in March that its monetary policy was “becoming meaningfully less restrictive” — in a signal some analysts interpreted as indicating restraint when it comes to lowering rates further.

Declines in national interest rates typically weigh on local lenders’ net interest income revenues from loans.