So much for a quiet summer Bank investors deserved more of a summer lull than they got. Q2 earnings were strong, the dividend ban was lifted, bond yields plunged, stress-tests did not surprise, but an accompanying regulatory change did. This report focuses on the lasting lessons from a busy few months and the key themes to watch for the rest of the year. Quarterly snapshot We wrap up Q2, including our usual heat-map, with a focus on changing fundamentals: NII, fees, provisions and capital. But Q2 was as much about single-stock debates as it was about top-down thematics - we explain our five recent ratings changes, including upgrades of SocGen, Unicredit and Bank of Ireland. Our Top Pick list retains a quality bias, but the improving breadth of our bottom-up convictions is encouraging. Earnings risks up and down Consensus upgrades have been meaty. Low provisions could yet drive an average +15% near-term upgrade, and an unignorable +7% to 2023e. But pre-provision expectations look increasingly bold and recent front--book lending rate pressure is troubling. Stock selection is pivotal. 22 in 2 We focus on capital and capital return. The good news: the most generous quartile of the sector will yield 22% in the next 2 years. The bad news: the ECB has made regulation more complex and opaque. You now need more disclosure than you''re getting, we argue. Checking in on valuations and correlations The sector has de-coupled from bond yields, helpfully. But such divergence tends not to last long. For the sector to outperform, bond markets need an abrupt change in mood. Investment implications We stay positive, buoyed by the bottom-up progress, with a few ''buts''.