Deutsche Bank is optimistic about the recovery of net interest income in the Spanish banking sector and the improvement of tangible asset returns, upgrading the rating

Investing.com - Deutsche Bank has upgraded the target prices for the Spanish banking sector and raised ratings for several banks. Analyst Alfredo Alonso stated in the research report that this is based on the resilience of earnings exceeding expectations and improved growth prospects.

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The investment bank upgraded Banco Santander from “Hold” to “Buy,” raising the target price from €13.50 to €15.80; upgraded Banco Sabadell from “Hold” to “Buy,” raising the target price from €3.40 to €3.80. CaixaBank received an upgrade from “Sell” to “Hold,” and Deutsche Bank increased its target price from €9.15 to €11.05.

Spain’s foreign bank and Banco Santander maintain “Buy” ratings. Deutsche Bank raised the target price for Spain’s foreign bank from €19.75 to €21.25, and increased Santander’s target price from €9.80 to €11.50. Unicaja Banco remains rated “Hold,” with its target price raised from €2.55 to €2.75.

According to Deutsche Bank analyst Alonso, Spanish banks continued to demonstrate resilience in net interest income beyond expectations in 2025, successfully navigating the challenging interest rate environment through proactive liquidity management and a faster-than-expected loan growth recovery. Alonso pointed out that strong fee income diversification and ongoing cost control have strengthened the sector’s profitability.

Deutsche Bank expects net interest income to resume an upward trend in 2026, supported by a fundamentally stable net interest margin and robust business activity.

The bank forecasts that starting in 2027, most institutions will achieve or exceed a 20% return on tangible assets, driven by strong asset quality and healthy capital generation.

Alonso describes the macro environment as benign, with limited risks to the sector’s development trajectory.

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