Progress in new Deutsche Bank targets seems "back-end loaded" - Kepler Cheuvreux

Investing.com - Deutsche Bank’s latest three-year targets are "quite ambitious," but most of the progress appears to be loaded to the "back-end" of that period, according to analysts at Kepler Cheuvreux.

In a note, the strategists including Nicolas Payen flagged that, with these fresh goals in mind, consensus estimates for the German lender’s 2026 pre-tax profit will have to be cut by around 3%.

On Tuesday, shares of Deutsche Bank were lower by 3.2% in mid-morning European trading, extending declines logged in the prior session. The stock’s decline on Monday outpaced other regional banks.

CEO Christian Sewing outlined his third major strategic program for the bank earlier this week, highlighting a desire to shift the focus of the business to "offense" from "defense."

"This means that for years, Deutsche Bank had to invest in risk and controls, as well as modernize the technology estate," the Kepler Cheuvreux analysts wrote. "But now, the bank can focus on growth."

Sewing’s tenure at the helm of Deutsche Bank has featured a prioritization on recording consistent income in the wake of years of underperformance and losses.

While some observers have predicted that the lender on pace to hit its current targets for the three years ended in 2025, criticism has swirled around the company’s perceived dependence on its investment bank and relatively weak retail banking operations.

The group is now aiming to notch return on tangible equity, a crucial profit gauge, of more than 13% by 2028, compared to a 2025 target of over 10%.

Deutsche Bank also plans to expand revenue to roughly 37 billion euros in 2028, versus about 32 billion euros this year.

Its cost-to-income ratio is seen falling to below 60%, down from its current goal of 65%.

To achieve these objectives, Deutsche Bank will focus on asset gathering, and its payments and advisory businesses, while looking to maintain "strict capital discipline" and build a "scalable operating model" partially through artificial intelligence, the Kepler Cheuvreux analysts said.

However, they added, the downbeat investor reaction to the new goals was indicative of the "back-end loaded nature of the profitability trajectory, as well as "potentially some interrogation" on economic assumptions made by the bank.

Unlike its last three-year plan in 2022, when a time of soaring inflation led to higher interest rates which bolstered profits, bankers and regulators are now warning of widespread uncertainty around trade, elevated debt levels, the sustainability of the boom in enthusiasm around AI, and a tepid German economy.