On Tuesday, Deutsche Bank made a positive adjustment to its assessment of Banco BPM SpA (BAMI:IM) (OTC: BNCZF), upgrading the stock from Hold to Buy and increasing the price target to €7.40, up from €6.50. The adjustment reflects the bank's expectation of a more resilient net interest income (NII) in 2025, which could lead to earnings surpassing the consensus forecasts.
The bank's analyst pointed to several factors underpinning the upgrade, including potential upside risks related to the bank's 14% CET1 capital ratio guidance for 2026 and an anticipated increase in speculative earnings per share (EPS) for the 2024-2027 period by approximately 4%.
According to Deutsche Bank, when excluding the value of listed/liquid stakes, excess capital, and targeted distributions, Banco BPM's stock is trading at a 2026E price-to-earnings (P/E) ratio of 2x. This suggests that the market is undervaluing a profitable and well-capitalized banking business.
The analyst also highlighted Banco BPM's proactive management of interest rate sensitivity as a key strength, helping to mitigate the impact of lower interest rates. This strategy is seen as supporting the upgraded EPS guidance for 2024 and bolstering confidence in the bank's ability to meet its 2026 net income target, even if the EURIBOR rate falls to 2%, significantly below the 3.1% assumed in the bank's business plan.
The bank's revised price target and stock rating reflect a more optimistic outlook for Banco BPM's financial performance over the coming years, suggesting that the institution is well-positioned to navigate the current economic environment and deliver value to its shareholders.
InvestingPro Insights
The recent upgrade by Deutsche Bank aligns with several key metrics and insights from InvestingPro. Banco BPM's current P/E ratio of 6.83, as reported by InvestingPro, supports Deutsche Bank's view that the stock may be undervalued. This is further reinforced by an InvestingPro Tip indicating that the company is "Trading at a low earnings multiple."
Moreover, InvestingPro data shows a strong revenue growth of 19.39% over the last twelve months, which could contribute to the bank's ability to meet its 2026 net income target as mentioned in the Deutsche Bank analysis. The company's operating income margin of 42.98% also suggests efficient operations, potentially supporting the resilient net interest income expected by Deutsche Bank.
An InvestingPro Tip highlights that Banco BPM has "raised its dividend for 4 consecutive years," which may be attractive to investors looking for steady income. This consistent dividend growth, combined with the bank's strong financial performance, could explain the impressive one-year price total return of 51.26% reported by InvestingPro.
For investors seeking more comprehensive analysis, InvestingPro offers 10 additional tips for Banco BPM, providing a deeper understanding of the company's financial health and market position.
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