Global banks have expressed their support for the new bank, the Defence, Security and Resilience Bank (DSRB), being established to support Nato countries and their allies finance their defence needs by boosting capital flows to military buyers and suppliers through both loans and bank guarantees.
Five commercial lenders comprising ING, Commerzbank, J.P. Morgan, LBBW and RBC Capital Markets have pledged support for the not-for-profit institution launched earlier this year ahead of Nato countries formally committed to raise their defence and security-related spending to 5% of GDP by 2035.
DSRB will use development finance tools to allow governments and suppliers to access long-term finance at materially lower costs, using strategies like callable capital, partial guarantees and diversification to bring down spreads without adding immediate fiscal pressure on governments. Participating banks will provide expertise on capital structuring, investor engagement, ratings advisory, risk and asset-liability management and debt capital market access and will also act as a draw to other banking partners, investment firms and stakeholders.
“We cannot meet today’s security challenges with yesterday’s financial tools,” said Mark Pieter de Boer, ING’s Chief Commercial Officer. “As a big European bank, we support the societies we operate in. Clearly there now is a bigger need for financing of defence activities focused on protecting Europe. The Defence, Security and Resilience Bank is the kind of bold, coordinated initiative we believe Europe and its allies urgently need. ING is proud to support it.”
“Momentum behind DSRB is building fast. In just a few months it has moved from think-tank sketch to serious discussion among governments, markets and industry. NATO’s new 5% spending pledge, the European Parliament’s endorsement and the UK’s taskforce support have turned the idea into a live project with banks now at the table,” wrote Wasim Tahir, Research Fellow at the Harvard Kennedy School, in a recent linked-in post.
Export credit agencies and export finance banks already provide significant funding to defence – in March, the UK unveiled a £2bn funding boost for the country’s export credit agency aimed at boosting foreign sales of defence goods to allied partners. But many lenders have also been reluctant to provide credit to the sector given perceived reputational risks.
Investors have been similarly lukewarm lest investing in defence trips ESG lines. But things are changing here too, as pension funds increasingly re-evaluate what constitutes ethical investing. A recent UK taskforce which bought together executives from across the defence industry, banks and investors led by the CBI and consultancy Oliver Wyman recommended a review of investment exclusions related to defence following complaints that the sector is shut out from capital raising because of ESG guidelines.
Lucrative returns on offer
Investors will certainly be able to tap lucrative returns. Treasury teams at European defence groups continue to boast adjusted EBIT, record order intakes, free cash flow and strategies like share buybacks as military spending soars in Europe.
In its recent earnings calls, French defence and aerospace group Thales, partially owned by the French state, raised its 2025 sales growth forecast and reported an 8% jump in first-half 2025 revenue. Sweden’s Saab, which manufactures military equipment including missiles and advanced electronics and submarines, projected sales growth of 16–20%. Elsewhere, the UK’s Babcock International reported a 51% jump in operating profits and 11% revenue growth year-on-year. The company initiated a £200m share buyback and raised dividends by 30%.
It was a similar story at BAE Systems which posted record orders, with an expected sales surpassing £30bn next year and profits exceeding £3bn EBIT in 2024 and a backlog in its order book of £77.8bn.
Elsewhere, Germany’s Rheinmetall has reported double digit growth in sales and profits and a backlog of €55bn. The company said operating earnings had surged 60% to €134m supported by a skyrocketing order backlog up to €40.2bn. Rheinmetall anticipates €30–€35bn in new orders from Germany alone and expects €80bn in total orders by June 2026.
Porsche SE said it is seeking to diversify from its core automotive focus and plans to invest up to €2bn in defence startups, particularly in dual-use technologies that serve both civilian and military purposes. The company is organising a Defence Day to attract investors and promote innovation.
Still, the sector faces challenges. Jan Pie, Secretary General of Aerospace and Defence Industries Association of Europe has warned that bureaucratic and regulatory bottlenecks are delaying factories and approvals, and he called for streamlined regulation and collaboration between public institutions and private industry.
Pie has also voiced concerns that around half of defence procurement still comes from non-European companies. He has warned against defaulting to US suppliers and reiterated the importance of investing – and extending finance to – Europe’s defence industry just as news reports suggest Ukraine will promise to buy US$100bn of weapons from the US, financed by Europe, in an attempt to obtain US security guarantees.
