Finance
UBS loses crown as continental Europe’s most valuable bank to Santander
A Santander office building in London.
Luke MacGregor | Bloomberg via Getty Images
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.
U.S. exposure
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.
European banks
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.
Cybersecurity and enterprise software stocks have been market dogs in 2026, with fears that AI will wipe out a wide range of companies in the enterprise space dominating the narrative. But they snapped a brutal losing streak this past week, joining in the broader market rally that saw all losses from the U.S.-Iran war regained by the Dow Jones Industrial Average and S&P 500.
Cybersecurity has been “a victim of some of the AI-related headlines,” Christian Magoon, Amplify ETFs CEO, said on this week’s “ETF Edge.”
It wasn’t just niche cybersecurity names. Take Microsoft, for example, which was recently down close to 20% for the year. Its shares surged last week by 13%.
A big driver of the pummeling in software stocks was a rotation within tech by investors to AI infrastructure and semiconductors and some other names in large-cap tech, Magoon said, and since cybersecurity stocks and ETFs are heavily weighted towards software companies, they were left behind even as those businesses continue to grow on a fundamental basis.
But Wall Street now has become more bullish with the stocks at lower levels. Brent Thill, Jefferies tech analyst, said last week that the worst may be over for software stocks. “I think that this concept that software is dead, and then Anthropic and OpenAI are going to kill the entire industry, is just over-exaggerated,” he said on CNBC’s “Money Movers” on Wednesday.
“Big Short” investor Michael Burry wrote in a Substack post on Wednesday that he is becoming bullish about software stocks after the recent selloff. “Software stocks remain interesting because of accelerated extreme declines last week arising from a reflexive positive feedback loop between falling software stocks and changes in the market for their bank debt,” he wrote.
The Global X Cybersecurity ETF (BUG), is down about 12% since the beginning of the year, with top holdings including Palo Alto Networks, Fortinet, Akamai Technologies and CrowdStrike. But BUG was up 12% last week. The First Trust NASDAQ Cybersecurity ETF (CIBR) is down 6% for the year, but up 9% in the past week.
Piper Sandler analyst Rob Owens reiterated an “overweight” rating on Palo Alto Networks which helped the stock pop 7% — it is now down roughly 6% on the year. Its peers saw similar moves, including CrowdStrike.
Performance of Global X cybersecurity ETF versus S&P 500 over past one-year period.
Magoon said expectations may have become too high in cybersecurity, and with a crowding effect among investors, solid results were not enough to to push stocks higher. But the down-and-then-back-up 2026 for the sector is also a reminder that when stocks fall sharply in a short period of time, opportunity may knock.
“Once you’re down over 10% in some of these subsectors, you start to see the contrarians start to say, ‘well, maybe I’ll take a look at this,'” Magoon said.
He said AI does add both opportunity and uncertainty to the cybersecurity equation, increasing demand but also introducing new competition. But he added, “I think the dip is good to buy in an AI-driven world,” specifically because the risks to companies may lead to more M&A in cyber names that benefits the stocks.
For now, investors may look for opportunity on the margins rather than rush back into beaten-up tech names. “I think investors are still going to remain underweight software,” Thill said.
But Magoon advises investors to at least take the reminder to keep an eye on niches in the market during pronounced downturns. “The best-performing are often the least bought and do the best over the next 12 months versus late-in-the-game piling on,” he said.
While that may have been a mindset that worked against the last investors into cybersecurity and enterprise software in mid-2025 when the negative sentiment started building, at least for now, it’s started working for the stocks in the sector again.
Meanwhile, this year’s biggest winner is also a good example of what can be an extended trade in either a bullish or bearish direction. Last year, institutional ownership of energy was at multi-year lows, Magoon said, referencing Bank of America data. “Reverse sentiment can be a great indicator,” he said.
But he cautioned that any selective buying of stocks that have dipped does have to contend with the risk that there is a potentially bigger drawdown in the market yet to come in 2026. That is because midterm election years historically have been marked by large drawdowns. “If you think it is bad right now, it could get a lot worse,” Magoon said. But he added that there’s a silver-lining in that data, too, for the patient investor. The market has posted very strong 12-month returns after midterm election drawdowns end. So, for investors with a longer-term time horizon and no need for short-term liquidity, Magoon said, “stick in there.”
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New innovation in the exchange-traded fund industry could come at a cost to investors during extreme conditions.
According to MFS Investment Management’s Jamie Harrison, ETFs involved in increasingly complex derivatives and less transparent markets may be in uncharted territory when it comes to violent downturns.
“Those would be something that you’d want to keep an eye on as volatility ramps up,” the firm’s head of ETF capital markets told CNBC’s “ETF Edge” this week. “As innovation continues to increase at a rapid pace within the ETF wrapper, [it’s] definitely something that we advise our clients to be really front-footed about… Lack of transparency could absolutely be an issue if we’re going to start seeing some deep sell-offs.”
His firm has been around since 1924 and is known for inventing the open-end mutual fund. Last year, ETF.com named MFS Investment Management as the best new ETF issuer.
“It’s important to do due diligence on the portfolio,” he said. “Having a firm that has deep partnerships, deep bench of subject matter experts that plays with the A-team in terms of the Street and liquidity providers available [are] super important.”
Liquidity as the real issue?
Harrison suggested the real issue is liquidity, particularly during a steep sell-off.
“We’ve all seen the news and the headlines around potential private credit ETFs. That picture becomes much more murky,” he added. “It’s up to advisors, to investors [and] to clients to really dig in and look under the hood and engage with their issuers.”
He noted investors will have to ask some tough questions.
“What does this look like in a 20% drawdown? How does this liquidity facility work? Am I going to be able to get in? Am I going to be able to get out? And if I’m able to get out, am I able to get out at a price that’s tight to NAV [net asset value], and what’s the infrastructure at your shop in terms of managing that consideration for me,” said Harrison.
Amplify ETFs’ Christian Magoon is also concerned about these newer ETF strategies could weather a monster drawdown. He listed private credit as a red flag.
“If your ETF owns private credit, I think it’s worth taking a look at, kind of what the standards are around liquidity and how that ETF is trading, because that should be a bit of a mismatch between the trading pace of ETFs and the underlying asset,” the firm’s CEO said in the same interview.
Magoon also highlighted potential issues surrounding equity-linked notes. The notes provide fixed income security while offering potentially higher returns linked to stocks or equity indexes.
“Those could potentially be in stress due to redemptions and the underlying credit risk. That’s another kind of unique derivative,” Magoon said. “I would very closely look at any ETF that has equity-linked notes should we get into a major drawdown or there be a contagion in private credit or something related to the banking system.”
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