Deutsche Bank has shaken up its UK banking recommendations, upgrading Paragon Banking Group PLC (LSE:PAG) from 'hold' to 'buy' and raising its target price from 890p to 1,050p.
The stock rose 4% to 928.5p.
Deutsche also nudged up its price targets for 'buy-rated' Barclays PLC (LSE:BARC) and Lloyds Banking Group PLC (LSE:LLOY), while maintaining 'hold' ratings on Standard Chartered.
Robert Noble, the lead analyst on UK banks, highlights that revenue growth across the sector over the next three years is expected to be the strongest in Europe, with earnings per share growth for some names running at twice the rate of their continental peers.
Yet despite this optimism, UK banks continue to trade at a discount compared to European rivals.
Noble favours banks with reliable capital generation, such as Lloyds and NatWest, pointing to their stable dividend potential and solid business models.
Meanwhile, Paragon’s upgrade reflects confidence that its shares now better reflect the company’s robust underlying performance, having shed its premium valuation despite strong fundamentals.
The bank also flags potential deal activity, particularly around smaller players such as OneSavings Bank, which it sees as an appealing acquisition target.
Overall, Deutsche Bank’s outlook for UK banks combines growth and consolidation opportunities, offering investors exposure to both predictable income and capital upside.