Few stories in the European finance industry, where I work, are as gripping (or as tainted by history) as the recovery of (NYSE: DB). As the bank moves from a “recovery trade” to a “focused growth” engine as we approach the 2026–2028 strategic cycle, I think we’re seeing a true structural shift in DB’s story after years of capital fragility and an apparently never-ending litigation conveyor belt. Prospective DB investors can still invest in this turnaround at a favorable valuation point because, in my opinion, the company has overcome its “legacy” obstacles and is now using its status as a “Global Hausbank” to generate returns that lead the market.
Latest Earnings Review: Clearing the Decks for 2025
DB’s fiscal year 2024 was a transitional one, as the company’s net profit fell from €4.9 billion in 2023 to roughly €3.5 billion. This decline in profit was caused by approximately €2 billion in nonoperating expenses, which were mostly related to litigation, including the ongoing Postbank takeover dispute. By covering those expenses in the past, the bank was able to improve its risk profile and resolve significant legacy issues for 2025. The data from the full-year 2025 results, which were made public in late January 2026, shows that the bank has at last attained the “resilient profitability” it had long promised.
DB’s total net revenues for 2025 reached the targeted €32 billion, a significant increase from the €30.1 billion reported in 2024. What impressed me most was the bank’s ability to keep up a positive revenue trend even as global interest rates started to stabilize. For example, the Corporate Bank segment showed strong loan growth, while the Asset Management division achieved organic growth with net inflows of €78 billion during 2025. On the expense side, the efficiency gains were clear. Management finished its €2.5 billion operational efficiency program by the end of 2025. This program involved redesigning processes and cutting jobs in non-client-facing roles. As a result, noninterest expenses dropped by 10% year-over-year to €20.7 billion, mainly due to an 86% cut in nonoperating and litigation costs. In my opinion, this significant reduction allows the bank’s core operational strength to stand out, putting it on track to reach its sub-60% cost-to-income ratio goal by 2028.
The Bullish Narrative for DB Stock in 2026-2028
I’m attempting to forecast Deutsche Bank’s future 1-2 years out because traders and investors say that in order to project a stock’s near-term growth, one must consider what will happen to it in the next 12-24 months. I think the bank’s transformation into a “Capital Return Machine” is the foundation of the bullish narrative. The age of predictable distributions has begun, and the age of survival risk is over, in my opinion.
The bank’s goals for 2028 include a revenue growth rate of over 5%, a Return on Tangible Equity (RoTE) above 13%, and a cost-to-income ratio under 60%. I agree that DB still trails some European peers that aim for even higher returns. However, the 13% RoTE target marks a significant improvement from the 10% targeted for 2025. For common stockholders, the most crucial factor is the bank’s distribution policy. The management team has confirmed its previous decision to return over €8 billion to shareholders through fiscal 2026. I expect the targeted payout ratio to increase to about 60% after 2026. If that happens, the bank will effectively provide substantial returns for its shareholders. You can access this opportunity at less than 8 times forward earnings, even after the recent rally.
DB’s prospects are also supported by the current macro setup. After years of stagnation, Deutsche Bank Research forecasts a noticeable economic recovery in Germany for 2026, with GDP growth of 1.5% – as the leading bank in Germany, Deutsche Bank should become the key beneficiary being an institutional proxy for this recovery. I’d expect higher IB commissions in the next few years, and more organic growth opportunities in general, which should lead to some multiple expansion ahead
AI is another crucial point, which may surprise some people. Although “Big Tech” has dominated the AI market, sectors like energy (for the demand for electricity) and construction (for data centers) are now gaining ground. Because of its solid ties to the utility and industrial sectors, I think Deutsche Bank is in a good position to represent this growth. I anticipate a spike in investment that could increase risk assets in 2026 as AI’s application spreads beyond technology to banks and healthcare. Deutsche Bank is leading this trend in European banking because of its emphasis on an AI-driven model. In any case, I think the stock price will rise if the bank achieves its 13% RoTE target.
Valuation Analysis
From a valuation perspective, I believe Deutsche Bank is valued reasonably. As of the time of this writing, DB trades at a tangible price-to-book ratio of 0.79x, while the banking industry on average trades at 1.4x, so DB looks 70-80% undervalued compared to its industry (in terms of P/S, at least). I understand that the above-mentioned upside sounds like too much, but for a bank targeting a >13% RoTE by 2028, I believe a plausible valuation range is 1.0x to 1.2x tangible book. If so, the fair value per share should be almost 40% above today’s stock price (i.e., at $49.5 per share). If we apply a conservative 10x bank multiple to current-year EPS forecasts, I see a share price target near $45, offering additional capital growth from current levels. So, the P/E calculations’ findings support those I made based on P/B calculations.
Takeaway Thoughts for Readers
The bank has effectively changed from a high-risk “recovery play” to a superior “execution play,” in my opinion. A bank with record profits, a solid capital position (CET1 ratio of 14.5%), and a definite commitment to returning capital to shareholders is what you are purchasing. The 2026–2028 narrative remains appealing to investors. I think Deutsche Bank has at last discovered the best road map to provide long-term value if you’re seeking exposure to major European financial hubs with a technological edge.
