Barclays shifts stance on Deutsche Bank and Commerzbank amid economic challenges
While Deutsche Bank faces mounting headwinds, its Frankfurt-based peer is seeing an improved risk-reward profile.
Barclays analyst Flora Bocahut has consequently downgraded Deutsche Bank from "Overweight" to "Equalweight" and slashed its price target sharply from €39 to €32. The message is clear: fundamental strengths remain intact, but their near-term impact is diminishing.
The core rationale lies in the macroeconomic environment. Barclays now expects a recovery in the German economy only in 2027—later than previously anticipated. Geopolitical uncertainties and lingering stagflation risks are dampening the cyclical tailwinds on which the bank heavily relies. Adding to the challenge is its increased exposure to private credit, which, while deemed manageable, is likely capping valuation upside.
Momentum is also fading. Downward revisions to earnings estimates are weighing on performance, with growth increasingly shifting into the future. The first quarter of 2026 is expected to be particularly weak. Though the bank's valuation—with an estimated 2026 P/E of 9.5 and a price-to-book ratio of 0.88—appears modest, Barclays argues this already reflects much of the risk. The only near-term support comes from its ongoing share buyback program.
The picture at Commerzbank, however, is starkly different. Here, Barclays has upgraded the stock to "Overweight" and raised its price target from €36 to €42. The shift is less about a sudden operational turnaround and more about the bank's expanding strategic options and an improved risk-return profile.
A key factor is UniCredit's involvement. Its stake in Commerzbank acts as an implicit downside cushion, with the share price hovering just above a potential offer level. Further share purchases could provide additional support, while mounting pressure on management may prompt more ambitious financial targets for 2026–2028.
Operationally, Barclays also sees upside. Rising euro swap rates could significantly boost net interest income, particularly through its €156 billion replication portfolio. Tighter cost discipline and conservative risk provisioning further bolster the outlook. The analyst has raised earnings estimates for 2026–2028 by 2% to 8%.
A direct comparison reveals a shift in perspective. While Deutsche Bank struggles with waning momentum despite solid fundamentals, Commerzbank is gaining traction with stronger growth potential and a more favorable risk-reward balance.
Trading at around 9x forward earnings for the next two years, Commerzbank not only appears cheaper but also offers higher earnings growth momentum, according to Barclays. External factors, such as potential M&A activity, could provide additional upside catalysts.
Bottom line: Both banks remain fundamentally sound. But for now, Commerzbank offers more upside and better downside protection. That said, investors holding either stock have little reason to act—both remain viable long-term holdings.
