Finance Desk

Strong bank earnings in North America and Europe contrast with growing investor concerns about 2027.

Despite strong earnings and healthy credit markets, bank investors are increasingly concerned about the sector’s 2027 outlook.

JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Morgan Stanley, UBS Group AG, HSBC Holdings, and Deutsche Bank AG have cited macroeconomic volatility and political uncertainty.

While profits at nearly all these banks are up from a year ago, doubts are emerging about the payoff from tens of billions of dollars in data center financing and about the prospect of further interest rate hikes.

A year ago, investors were more optimistic about the sector ahead of the Federal Reserve’s December 2025 interest rate cut. Data center spending was viewed as a growth opportunity, but it is increasingly seen as a potential risk if investments in AI fail to deliver expected returns.

On the plus side, yields on 10-year U.S. Treasury notes fell below 5% in recent weeks after exceeding that level in the third quarter, and the Fed held interest rates steady at its October meeting. Banks continue to benefit from robust economic activity, active dealmaking and strong wealth management businesses.

“It is a very, very favorable environment for banks,” said Ian Lapey, manager of the Gabelli Global Financial Services Fund (GFSIX), which holds several U.S. banks, including First Citizens BancShares Inc. and Citigroup Inc., as well as European banks such as Barclays, Banco Bilbao Vizcaya Argentaria S.A. (BBVA), ING Groep N.V., Banco Santander and Société Générale.

“You’re seeing strong revenue growth across the board, including fee income, investment banking revenues, advisory revenues, and net interest income, which is also growing,” Lapey said. “The credit environment has been really benign for several years.”

Most banks are also buying back stock, a sign of confidence in the economy. Employment levels and consumer spending in the U.S. have remained resilient despite frustration over rising living costs.

Challenges for 2027

Lapey said banks face a more challenging environment in 2027 as revenue growth normalizes and risks associated with certain types of debt rise. Potential cracks in credit quality could emerge, especially for U.S. banks, amid concerns about data center financing and exposure to private credit, he said.

While U.S. banks have greater exposure to private credit and AI data-center financing, European banks are better positioned to generate cash, repurchase shares, and increase dividends, he said.

Among the banks’ forecasts, UBS expects “a more typical sequential seasonal moderation in transaction volumes” in the coming year, and its current global banking pipeline is expected to help it increase revenue sequentially, assuming constructive markets.

JPMorgan Chase, which raised its net interest income outlook, said it expects “pretty stable” corporate credit conditions.

“Obviously, there are issues out there, and we’ll have to see how they flow through — the performance of our borrowers, energy prices, fuel inputs, and higher rates. These are all things that will create challenges in different pockets of the economy,” JPMorgan Chase CFO Jeremy Barnum said on the bank’s call with analysts. “It’s very early, obviously, but in general, we think corporate balance sheets are in quite good shape. There’s been resilience, but there are a lot of pressures building up. So, we’ll have to see what happens.”

Such uncertainty has weighed on bank stock sentiment, prompting investors to react more negatively to results that fall short of expectations.

NatWest shares fell nearly 9% on Oct. 30 after the bank reported nearly a 100% increase in impairment charges, which bit into profits.

“This is sort of a classic Wall Street overreaction,” Lapey said. “They actually put up a return on tangible equity of 21.6%, which makes them among the most profitable banks in the world. I’d say the outlook for that company is quite good.”

Ian Lapey of Gabelli Funds says banks’ Q3 results revealed solid businesses, but the sector could face more headwinds next year.

Steve Gelsi is a contributing writer based in the U.S.

Ueno Bank’s collapse sparked a political crisis for Paraguay as ties to the digital lender engulfed President Peña.

Paraguay’s Senate has officially summoned President Santiago Peña to appear before Congress on Friday as part of impeachment proceedings, following the collapse of Ueno Bank, a digital lender linked to Peña and his family.

Peña resigned on Thursday, but Paraguay’s Congress refused to accept the resignation.

The political crisis escalated after Ueno, which served about 60% of Paraguay’s bank customers, succumbed to alleged insider lending and a capital shortfall, leaving millions of customers unable to access their accounts.

A Nov. 6 investigation by Paraguayan newspaper Última Hora found that Peña declared ownership of shares in Ueno Holding — valued at approximately $800,000 — and deposits at Ueno Bank, before reporting the sale of those shares in 2025.

Luxembourg-based U Holdings S.à r.l., established in 2023 by Federico Miguel Vázquez, whose Grupo Vázquez controls Ueno Bank, also lists Peña’s brother, Francisco Peña Palacios, as a major stakeholder.

So far, Paraguayan prosecutors have ordered the arrest of senior executives and businessmen linked to Ueno, including Vázquez. It’s unclear whether Vázquez was arrested at the time of reporting.

What Peña Announced

In an address to the nation, Peña said he had decided to resign, citing the need to preserve Paraguay’s political stability. He also apologized to the Paraguayan people and called for the return of funds to customers affected by Ueno Bank’s collapse, according to Agencia EFE, Spain’s national news agency.

“I do so with the stability of our country, social peace, and the need to preserve our democratic institutions in mind,” Peña said.

So far, the bank has administered approximately $850 million in public funds.

What Happens Next?

Ueno Bank will continue to be subject to central bank intervention after regulators found that its solvency ratio had fallen below legal requirements.

Despite announcing his resignation, Peña denies wrongdoing and agreed to appear before the Senate to defend himself in the impeachment proceedings.

The controversy also put Vice President Pedro Alliana in the spotlight as the constitutional successor to the president.

Anthony Noto covers corporate finance and private credit. Contact him at anoto@gfmag.com.

Asian shippers eye the Arctic Northern Sea Route as the Middle East conflict disrupts traditional trade lanes.

This article appears in the November issue of Global Finance Magazine.

Asian countries are betting on the Arctic Northern Sea Route as an alternative to traditional shipping lanes to send goods to Europe as the U.S.-Iran conflict makes the Persian Gulf less attractive. In August, the container ship Pan Star Acro left South Korea for the U.K., the Netherlands, and Poland via the Arctic. The same month, the Dubai Tower, operated by the Chinese company Sea Legend, left Qingdao for Teesport in the U.K.

At first, the Suez Canal appeared the natural alternative to the Gulf, but attacks by Yemen’s Houthi rebels on vessels in the Red Sea and the Bab al-Mandeb strait curbed shippers’ enthusiasm. And Plan B, the Cape of Good Hope, is costly. 

“The route Shanghai-Le Havre [France] via the Suez Canal is a 40-day trip,” said Jérôme de Ricqlès, shipping expert at the digital logistics platform Upply. “The Cape of Good Hope option is even longer, 60 to 65 days.” That leaves Asian shipping companies with the Northern Sea Route, or NSR. 

“The gain is really noticeable,” de Ricqlès said. “The journey only lasts 20 days.” The NSR also appears less costly. 

The Russian Complication

Not that it’s ideal. 

Interest in the Arctic is growing, Allianz acknowledged in its Safety and Shipping Review 2026, “but the region remains higher risk.” Machinery damage, territorial disputes, and potential sanctions against Russia complicate operations. 

The ice silk lane runs along the Russian coast for thousands of kilometers, so shipping companies need the Kremlin’s green light and specialized icebreakers to escort vessels through the Arctic passage. The route is open only from August to October. 

While Sea Legend promises weekly container service beginning next summer, “it will only operate for eight weeks,” said Niels Rasmussen, chief shipping analyst at BIMCO, or Baltic and International Maritime Council. Asian shipping companies will be able to carry “less than 0.5% of the weekly volume from East and Southeast Asia to North Europe.” 

“On paper, NSR is very attractive; in reality, the route is at an early stage of development,” said de Ricqlès. Volumes are small, and the environmental impact could be large. Mindful of a potential acceleration of damage from global warming, several shipping giants, including Maersk, Mediterranean Shipping Co., CMA CGM, and Hapag-Lloyd, have already pledged to “not use the Northeast passage.”  

But never say never. 

“Within 20 years, global warming could allow six months of navigation in the Arctic,” de Ricqlès speculated. China, which benefits from a limitless friendship treaty with Russia, would then be able to establish robust polar traffic between Asia and Europe. While Korean and Chinese shipping companies currently operate small vessels with a capacity of around 2,000 to 3,000 TEU (20-foot equivalent units), future ships could be considerably bigger. 

“China is working on nuclear-powered container ships,” said de Ricqlès. “Ports usually stay far away from risky nuclear vessels, but Gdynia in Poland would be the perfect port of entry to Europe.” One of its terminals is controlled by CK Hutchison, a Chinese conglomerate. 

Caroline Crosdale is a contributing writer based in the U.S.