On Monday, Deutsche Bank (ETR:DBKGn) adjusted its price target for ABN Amro shares, increasing it to €16.00 from the previous €15.00, while reaffirming a Hold rating for the stock. The adjustment reflects the potential impacts of ABN Amro's acquisition strategy and capital return prospects.
The analyst from Deutsche Bank noted that ABN Amro, since its listing in 2015, has been largely without growth, but its high potential for capital return often compensated for this stagnation. However, recent developments have altered the bank's financial landscape.
Over the past five years, there has been significant risk weight inflation, and the bank's excess capital position has been substantially diminished, particularly after its move to acquire the German private bank Hauck Aufhäuser Lampe (HAL).
Due to these changes, Deutsche Bank has revised its projections for ABN Amro's share buybacks, reducing the expected volume. Despite the cut in buyback forecasts, the bank is anticipated to maintain annual share buybacks of €500 million.
This level of capital return is marginally above the sector average, with the bank trading at a total capital return of 10.7%, 7.4 times earnings per share (EPS), and 0.55 times tangible book value. The expected return on tangible equity (ROTE) stands at 7.6%.
The revised target price to €16 reflects the anticipated benefits of the HAL transaction, as the acquisition is expected to contribute to ABN Amro's financial metrics and overall valuation.
The Hold rating indicates that Deutsche Bank views the current valuation as appropriate given the bank's financial outlook and market conditions.
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