Exchange-traded funds can offer a simple and inexpensive way to gain exposure to the stock market. These strategies offer exposure to European bank equities and are worth considering, according to Morningstar’s fund analysts.
European financial stocks were among the worst performers in the first quarter of 2026, with the sector losing roughly 6%, lagging the Morningstar Developed Markets Europe Index by five percentage points. However, this followed an exceptional 2025, during which the Morningstar Developed Markets Europe Banks Index rebounded by 70%.
The outbreak of the conflict in Iran played a major role in the recent selloff.
“In March European banks have declined around 10% from their highs as rising oil and gas prices and the prospect of higher-for-longer interest rates fuel fears that loan defaults will rise,” says Johann Scholtz, Morningstar senior equity analyst.
“Direct exposure to the Middle East is negligible for most European banks. The transmission channel is indirect; higher energy costs squeeze client margins, weaker growth raises default rates, and risk-off conditions tighten leveraged finance,” he adds.
“The market often overshoots when pricing in credit risk corrections, and if the conflict intensifies, attractive entry opportunities should emerge,” he says.
Morningstar analysts see the sector as fairly valued. European banks enter this period with structurally higher profitability and capital than prior credit cycles and overall rates staying higher for longer supports net interest margins.
“Improved profitability provides a meaningful buffer before rising credit costs become more than an earnings story and solvency becomes a concern,” says Morningstar’s Scholtz.
Screening for the Best European Bank Equity ETFs
To help investors find ETFs focused on European banks, we’ve screened 28 ETFs in Morningstar’s Sector Equity Financial Services category for those exposed to Europe with positive Medalist Ratings.
A Gold Medalist Rating means our analysts believe a fund has the greatest chance of outperforming its category over the long term, while a Silver or a Bronze rating means they believe it will outperform its relevant performance benchmark and/or peer group.
In the case of European bank equity ETFs, we have six strategies by five different providers making the list:
- iShares STOXX Europe 600 Banks UCITS ETF EXV1
- Amundi STOXX Europe 600 Banks UCITS ETF Acc LBNK
- iShares MSCI Europe Financials Sector UCITS ETF ESIF
- SPDR® MSCI Europe Financials UCITS ETF STZ
- Invesco STOXX Europe 600 Optimized Banks UCITS ETF SC0U
- Xtrackers MSCI Europe Financials Screened UCITS ETF 1C XS7R
We screened for ETFs with Gold, Silver or Bronze Medalist Ratings. None of the four ETFs that made it through the screen hold a Medalist Rating of Gold or Silver, nor are they actively managed.
They track five different benchmarks.
Here’s a closer look at the strategies:
iShares STOXX Europe 600 Banks UCITS ETF (DE) EXV1
- Morningstar Medalist Rating: Bronze
- Morningstar Rating: ★★★★
- Ongoing Charge: 0.46%
- Benchmark: STOXX Europe 600 Banks TR Index
The iShares STOXX Europe 600 Banks UCITS ETF seeks to replicate, net of expenses, the STOXX Europe 600 Banks TR, a subindex of the STOXX Europe 600 index, as closely as possible. The fund invests in physical index securities. It offers exposure to the 55 European Banks.
The ETF gained 55.55% over the past year, outperforming the average fund in the equity financial services category, which rose 27.52%. The fund placed in the first percentile for performance and beat its benchmark, the Morningstar Global Financial Services Index, by 31.74 percentage points. The fund has gained 3.51% year to date, while the average fund in its category is up 1.07%.
Amundi STOXX Europe 600 Banks UCITS ETF LBNK
- Morningstar Medalist Rating: Bronze
- Morningstar Rating: ★★★★
- Ongoing Charge: 0.30%
- Benchmark: STOXX Europe 600 Banks TR Index
This ETF rose 55.24% over the past year. The gain on the passively managed fund beat the 27.52% gain on the average fund in the equity financial services category, leaving it in the third percentile for performance. The fund beat its benchmark, the Morningstar Global Financial Services Index, by 31.43 percentage points. Year to date, the Amundi fund rose 3.64%, while the average fund in its category rose 1.07%.
iShares MSCI Europe Financials Sector UCITS ETF ESIF
- Morningstar Medalist Rating: Bronze
- Morningstar Rating: ★★★★
- Ongoing Charge: 0.18%
- Benchmark: MSCI Europe Financials 20/35 Capped NR
The passively managed iShares MSCI Europe Financials Sector UCITS ETF gained 33.63% over the past year, outperforming the average fund in the equity financial services category, which rose 27.52%. The fund placed in the 38.0th percentile for performance and beat its benchmark, by 9.82 percentage points. The fund has gained 2.27% year to date.
It tracks the MSCI Europe Financials 20/35 Capped Index, a benchmark with 84 constituents which measures the performance of large and mid-cap financial companies across developed European markets. It uses a capped methodology, limiting the largest group entity to 35% weight and others to 20%, seeking to increase diversification.
State Street SPDR® MSCI Europe Financials UCITS ETF STZX
- Morningstar Medalist Rating: Bronze
- Morningstar Rating: None
- Ongoing Charge: 0.18%
- Benchmark: MSCI Europe Financials 20/35 Capped NR
The EUR 722.8 million State Street SPDR MSCI Europe Financials UCITS ETF rose 33.49% over the past year. The fund beat its benchmark, the Morningstar Global Financial Services Index, by 9.68 percentage points. Year to date, the State Street fund rose 2.43%.
Invesco STOXX Europe 600 Optimized Banks UCITS ETF SC0U
- Morningstar Medalist Rating: Bronze
- Morningstar Rating: ★★★★
- Ongoing Charge: 0.20%
- Benchmark: STOXX Europe 600 Optimized Banks NR EUR
This ETF gained 56.55% over the past year, outperforming the average fund in the equity financial services category, which rose 27.52%. The fund placed in the fifth percentile for performance and beat its benchmark by 32.74 percentage points. The fund has gained 3.22% year to date.
Its benchmark, the STOXX Europe 600 Optimized Banks Index, tracks a selection of highly liquid banks within the eurozone banking sector. It applies a sector dependent liquidity cap that reduces the weight of only those constituents whose average daily turnover, as a fraction of its free float market cap, is below the sector average. This hybrid market cap and with the liquidity weighting methodology optimizes the tradability while retaining the free float.
Xtrackers MSCI Europe Financials Screened UCITS ETF XS7R
- Morningstar Medalist Rating: Bronze
- Morningstar Rating: ★★★
- Ongoing Charge: 0.17%
- Benchmark: MSCI Europe Financials Screened 20/35 Select Index
The Xtrackers MSCI Europe Financials Screened UCITS ETF rose 30.98% over the past year. The fund beat its benchmark, the Morningstar Global Financial Services Index, by 7.17 percentage points. Year to date, the strategy rose 2.75%.
The ETF seeks to track the MSCI Europe Financials Screened 20/35 Select Index, which tracks large and mid-cap European companies from the financial sector. The stocks included are filtered according to ESG criteria (environmental, social and corporate governance). Excluded sectors and companies: weapons, tobacco, thermal coal, oil sands, non-compliance with UN Global Compact. The weight of the largest constituent is constrained to 35% and the weights of all other constituents are constrained to a maximum of 20%.
