Erratum: This report is a correction to the document published today at 06:01 UK time adjusting our drawdown calculation to align with EBA policy. Celebrating the start of August with the EBA stress test Ahead of the weekend, the EBA released its 2025 stress test results - something that sparked a lot of attention in the past. Recently, the results have been less of a driver of share prices - but this iteration highlights the benefits of positive interest rates beyond the short-term PandL boost. In this report we highlight sector and stock conclusions arising from the 2025 exercise. Another confirmation of the sector''s transformation For several quarters European banks bulls have argued that we need to have a discussion about ''fair'' multiples for the sector. We''ve surpassed the long-term average P/E level, but as this stress test has showed again, the environment for European banks has changed. The adverse capital ratio drawdown has come down by 100bps for the sample as a whole to just 370bps - not because of a more benign scenario (credit losses were actually higher), but because of the vastly improved revenue generation profile, whilst capital and observed asset quality continue to be solid. On a stock level this means: Many winners, no real losers Looking at the stock-specific news, we see close to no negative developments here: not a single bank faced a slip in their P2G CET1 bucket, whilst half of the banks moved into a better bucket - which could potentially lead to lower capital requirements. We would say that AIB emerges as the winner of this exercise (closely followed by BMPS and BPER), whilst looking for ''losers'' would be a very ''glass half-empty'' approach. A transformed sector with improved resilience to macroeconomic shocks The EBA stressed the banks not just for a recession this year, but also for elevated geopolitical and trade tensions - thus, the scenario is highly relevant for the current debate. The conclusions? Encouraging. We...