Deutsche Bank upgrades shares of HSBC and NatWest Group to 'buy'

(Sharecast News) - Analysts at Deutsche Bank sounded a positive note on the outlook for UK and Irish banks, telling clients that their business mix was becoming more profitable.
Hence, they said: "We expect many banks will announce upgraded medium term returns guidance with full year results which should support share price performance in the next 12 months."

Yes, inflation and investment could be expected to subtract from earnings, but higher interest rates and low unemployment were expected to be a "net positive" for earnings and share prices going forward, they said.

Furthermore, capital returns were running above 10% per year and at 0.5 times' their estimated price-to-tangible book value for 2024, shares of UK and Irish banks were trading "at a significant discount".

"Our preference is for domestic UK banks which have most exposure to rate increases which drive the majority of expected revenue growth in the next three years," they added.

Lloyds was their Top Pick with the analysts marking up their target price from 60.0p to 63.0p.

They also upgraded their recommendation for shares of HSBC from 'hold' to 'buy', while raising their target from 390.0p to 480.0p, and that for NatWest Group from 'hold' to 'buy' and raised their target from 260.0p to 300.0p.

Barclays's shares on the other hand were downgraded from 'buy' to 'hold' and its target price cut from 250.0p to 240.0p and Virgin Money UK's target price was lowered from 260.p to 245.0p.