Top European Banks Poised for Growth, According to RBC Capital Markets

Investing.com -- European banks are showing strong potential for growth, with Deutsche Bank and OneSavings Bank leading the pack according to recent analysis from RBC Capital Markets.

Deutsche Bank (XETRA:DBK GR) and OneSavings Bank (LSE:OSB LN) have both received "Outperform" ratings from RBC Capital Markets, positioning them as top choices in the European banking sector. Each institution offers unique strengths that could drive significant shareholder value in the coming years.

Deutsche Bank (XETRA:DBK GR)

With a market capitalization of $59.6 billion, Deutsche Bank trades at 0.93x book value and 10.7x 2025 estimated earnings. The bank is strategically positioned to benefit from Germany’s fiscal expansion measures and increased defense spending across Europe.

These initiatives could add approximately 0.5% to German GDP annually over the next decade, creating favorable conditions for Deutsche Bank, which has 42% of its corporate and retail loans concentrated in Germany.

Deutsche Bank also has significant internal improvement opportunities, particularly in its Private Bank segment. Management aims to double pre-tax profit/RWA from 2024 levels in its next strategic plan.

Ongoing digitization and branch optimization could help improve Private Bank returns from 6.7% in 2024 to mid-teens in coming years, potentially adding 2 percentage points to group return on tangible equity (ROTE).

The bank’s target of achieving 12% ROTE beyond 2025 appears increasingly attainable through these internal initiatives.

In a recent development, Deutsche Bank announced the appointment of Lisa McGeough to lead its Americas region, a position she is set to take up in early 2026.

OneSavings Bank (LSE:OSB LN)

With a market capitalization of $2.0 billion, OneSavings Bank trades at 0.9x book value and 6.9x 2025 estimated earnings. The bank offers an attractive 6.5% dividend yield and is expected to deliver the largest dividend and total shareholder return yield across RBC’s coverage in FY26.

OneSavings Bank’s buy-to-let business is described as a "cash cow," and following the announcement of "near-final" Basel 3.1 rules in September 2024, the bank should have sufficient capital visibility to begin delivering substantial shareholder returns.

RBC analysts believe 18 months of clean results could trigger a significant re-rating of the stock, which currently trades at a substantial discount to its nearest peer.

The Bank of England’s recent increase in the MREL asset threshold could potentially exempt OneSavings Bank from MREL requirements, which might represent approximately 10% upside to consensus expectations for future net profits.

Management has maintained conservative guidance for FY25, including low-single-digit loan growth and a net interest margin of around 225 basis points.

Both banks face specific risks to their growth trajectories, including potential regulatory changes, competitive pressures, and broader economic uncertainties, but their fundamental positioning appears strong according to RBC Capital Markets’ analysis.

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