European Banks Eye Fee Growth in 2026 as PE Exits & IPOs Revive

City dealmakers—banks in London and wider Europe—are cautiously optimistic about their fee trajectory in 2026. After a flat 2024 and modest 2025 gains, the sector is banking on several tailwinds: a rebound in private equity exits, easing valuation mismatches, lower financing costs, and, crucially, a recovery in IPO markets especially in the UK. However, a range of macro, regulatory, and market-structure challenges mean that upside is plausible but not guaranteed.

Drivers of recovery: Private equity in Europe has shown meaningful strength: deal volumes rose ~14% through Q3 2025 relative to the same period in 2024, coming in at about €460.5 billion, with full‐year projections near a ~9% gain. [6] Large-ticket deals (especially €1–5 billion range) now make up a greater share of activity. [6] Exits have lagged but tools like continuation vehicle structuring are increasingly employed. [1] At the same time M&A value in Europe rose ~22% in 2025, but sponsorship and activity remain mid-market weighted. [1]

IPO market’s drag on fees: IPO activity continues to be a weak link. European IPO proceeds are low—just US$19.4 billion for the year—and UK exchange listings are particularly depressed, with significant YoY drops in proceeds (€ and £). Volume is low and high-profile listings sparse. [1][4] Factors include trade/tariff uncertainty, inflation and rates, and concerns around valuation. [2][4]

Fee growth lagging in Europe vs US: Banks in Europe saw only ~2% YoY growth in fees in 2025, a striking contrast to ~14% in the US. [1] US deal and IPO markets are further ahead of Europe in terms of recovery; Europe tends to lag the US by several months during recoveries. [1] EY-Parthenon forecasts modest continued growth in volumes for both corporate M&A and private equity in the US through 2026. [3]

Risks and open questions:

• Will IPOs actually pick up in major European centres (UK, Germany, France), or will lingering regulatory, valuation, or macroeconomic headwinds block momentum?
• Can banks maintain margins and fee rates in the face of competitive pressure, especially in mid-market, and from boutiques?
• What is the impact of cross-border deal activity, both into Europe (USD-investors) and out of Europe, on fees? Will ESG, tax, regulation affect these flows materially?
• How much will macroeconomic volatility (inflation, rate hikes, geopolitical risk) derail optimism?
• Structurally, will the trend of longer PE holding periods reduce exit frequency—and thus fee realization—in the near term?

Strategic implications for banks:

• Investment banks should deepen cross-border and sector-specialist capabilities, especially in large-ticket deals and infrastructure/sustainability sectors which are expected to grow. [1][6]
• Build IPO advisory readiness—preparing companies well in advance, clarifying profitability path, aligning regulatory compliance—to capture early movers when sentiment recovers. [4]
• Maintain flexible capital for PE-sponsored deals, including developing expertise in continuation vehicles and alternate exit routes. [1][5]
• Strengthen forecasting and scenario planning for fee income, so that banks can stress test under lower IPO or exit rates.
• Invest in cost discipline and advisory efficiency, possibly embracing new delivery models or tech to sustain margins if fee pressure intensifies.