On Thursday, JPMorgan (NYSE:JPM) shifted its stance on ABN Amro (ABN:NA) (OTC: ABNRY), upgrading the bank's stock from Underweight to Neutral. The financial institution now has a price target of EUR 15.30 on the bank's shares. This adjustment comes amid expectations of increased mergers and acquisitions (M&A) activity in the European banking sector.
The analyst from JPMorgan noted that previous interest in ABN Amro from banking entities such as Nordea and BNP has been part of the sector's landscape, with Nordea's position on M&A remaining unspoken and BNP having formally denied such interest.
Despite these dynamics, ABN Amro's current valuation at 0.5 times price to tangible net asset value (P/TNAV) and a price-to-earnings (PE) ratio of 5.8 for the year 2026 for a return on tangible equity (RoTE) of 8.7% positions it as a potentially attractive target for acquisition.
ABN Amro's Dutch retail operations and its Northern European Private Banking business were highlighted as particularly appealing to potential buyers. However, it was also noted that the Dutch government retains a significant ownership stake in ABN Amro, holding approximately 41%.
From an earnings perspective, JPMorgan anticipates limited growth in net interest income (NII) from 2024 to 2026, with low contributions expected from the Treasury and replication portfolio. The bank's loan growth is also expected to be modest when compared to its more growth-oriented peers.
Looking ahead, JPMorgan forecasts ABN Amro's RoTE to approach roughly 9% by 2026. The bank's cost-income ratio (CIR) is projected to remain high at 63%, compared to its competitors. Additionally, provisions are estimated at 20 basis points annually for 2025 and 2026.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.