Deutsche Bank’s so-so new plan may yet require M&A

ABN Amro Bank NV

18/11/2025 12:35

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By George  Hay

LONDON, Nov 18 (Reuters Breakingviews) - Benchmarked against itself, Deutsche Bank DBKGn.DE is doing fine. The $67 billion German lender said on Monday it would target a 13% return on tangible equity (ROTE) by 2028 - a step-up from the 10% objective of its current three-year plan, which ends in 2025. Yet given the jazzier numbers offered by its European banking peers, boss Christian Sewing probably needs a plan B to keep his investors’ attention.

Deutsche's 13% ROTE objective is seen by management as very much a baseline that can be bettered as and when the German economy responds to stimulus. But the inability to be sure of that, or the impetus that would come from a closer European-wide savings and investment union, means it pays to be conservative. Still, Credit Agricole CAGR.PA said on Tuesday it was aiming for a 14% ROTE by 2028, while domestic rival Commerzbank CBKG.DE is gunning for 15%. The likes of UBS UBSG.S reckon they can get to 18% by that year - and some others, like BBVA BBVA.MC and UniCredit CRDI.MI, are already there now.

Sewing can’t do a great deal about any of this, at least not quickly. Spanish banks have extensive exposure to fast-growing Latin America; UBS and Intesa Sanpaolo ISP.MI have large wealth management arms. Deutsche, by contrast, has to contend with a traditionally uber-competitive home retail market that crimps returns. German GDP may only grow 0.9% in 2026, according to the International Monetary Fund.

One upshot is that Deutsche’s targets may not prove as conservative as they might seem – a planned 8% annual growth rate in its corporate bank compares to the 4% assumed by analysts compiled by Visible Alpha. The risk is that if the German economy underperforms, even Sewing’s 13% goal may look out of reach. And with Deutsche’s shares up over 70% in 2025 and now trading around tangible book value, investors may feel that the good news is already in the price.

Sewing does have one option only briefly referenced in his investor day: M&A. Dutch group ABN Amro ABNd.AS isn’t definitively on the block, but if the $19 billion group were it could yield a 12% return on invested capital, according to Breakingviews calculations. A deal with $43 billion domestic rival Commerzbank, long debated, would yield a nearly respectable 10% annual return by 2028, using Visible Alpha estimates and assuming a 20% takeover premium, before what would likely be chunky synergies.

Of course, from Deutsche's perspective the time to merge with Commerzbank would have been last year, when it was worth less than $20 billion. European banking deals in recent years have generally failed to complete, and bidding would be intense. But M&A battles tend to be won by those who need it more. Depending on what investors end up thinking of its targets, that may yet be Deutsche Bank.

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CONTEXT NEWS

Deutsche Bank said on November 17 it aimed for a return on tangible equity of more than 13% by 2028, up from its goal for 2025 of more than 10%.

Presenting a three-year plan for 2026 to 2028 at its investor day, the German lender said it wanted to increase revenue to around 37 billion euros ($42.91 billion) in 2028, up from around 32 billion in 2025.

It also envisages a cost-to-income ratio of below 60% by 2028, down from its current target of below 65%.

Deutsche Bank shares closed at 30.8 euros on November 17, down 3.3%. As of 1041 GMT on November 18, the shares were down 3.3% again, more than a 2.3% drop in the wider European banking sector.

Deutsche Bank’s new 2028 return target is lower than that of multiple peers https://www.reuters.com/graphics/BRV-BRV/movabjzxypa/chart.png

(Editing by Neil Unmack; Production by Shrabani Chakraborty)

((For previous columns by the author, Reuters customers can click on HAY/george.hay@thomsonreuters.com))