The principal objective of this research proposal is to gain a comprehensive understanding of the key drivers behind the profitability of European banks. The rationale behind the focus on profitability lies in the fundamental role it plays as the primary safeguard against potential shocks. This is especially relevant for European banks as these are faced with market-to-book ratios that are significantly lower than those of their international peers, reflecting that a significant share of investors has doubts about the economic viability of European banks. The novelty of this proposal is that it makes detailed use of the information surrounding banks' earnings announcements. In the first work package, I examine whether European banks' valuations are driven by structural profitability trends and whether these can explain their underperformance relative to their international peers. In the second work package, I assess how post-crisis regulation has impacted the lending behaviour of European banks. To achieve this, a textual analysis approach on banks' earnings calls is proposed to identify an accurate timing of regulatory shocks. The ECB's recent move to a more restrictive monetary policy stance presents a unique opportunity to test the effect of monetary policy on bank profitability and on lending activities. This will serve as the final part of this proposal, which seeks to provide new perspectives for policymakers by analysing banks' earnings announcements.