An emphatically bullish stance on Paragon Banking Group PLC (LSE:PAG) has been taken by Deutsche Bank, which calls it the cheapest bank in its UK coverage and one of the lowest valued across Europe.
The shares have slid 7% since the full-year 2025 results, yet analyst Robert Noble notes that his forecasts have barely changed, making the sell-off look unwarranted in his view.
Paragon trades on 5.9 times expected 2027 earnings, a multiple Deutsche Bank says is difficult to match anywhere in the European banking sector.
At today’s price, the stock implies a total capital return yield of 12%, rising to about 15% by 2028, the highest in the UK banking space. Noble argues that this combination of strong returns and low valuation is “not a bank that should trade at a discount”.
The bank also highlights Paragon’s consistently strong profitability. Earnings per share have grown at an average rate of 16% over the past three years, and Deutsche expects around 12% over the next three.
Return on tangible equity has averaged 17.3%, with an expected rise to more than 18% in the coming years.
Crucially, Deutsche sees Paragon’s earnings accelerating into 2027 and 2028 as interest rates stabilise, in contrast to the UK’s largest banks, where growth is likely to slow.
It raises its price target from 1,050p to 1,100p and reiterates its 'buy' rating.