Goldman Sachs upgrades ABN Amro stock to Buy on expected returns improvement

Goldman Sachs upgraded ABN Amro to Buy from Sell, raising its price target to EUR32.50 from EUR24.70, citing expectations for improved returns driven by projected net interest income (NII) growth to €7.4 billion by 2028, fueled by hedging tailwinds and a steepening yield curve. Goldman's NII forecasts exceed consensus by 4-6% for 2026-28, anticipating a Q3 trough in replicating portfolio income and a rise in Return on Tangible Equity from 9% to 12.5% by 2028, ahead of ABN Amro's Investor Day.

Analysis

Goldman Sachs has executed a significant, two-notch upgrade on ABN Amro, moving its rating from Sell to Buy and increasing the price target to EUR32.50 from EUR24.70. The core of this bullish thesis rests on expectations for substantially improved returns, primarily driven by expanding Net Interest Income (NII), which Goldman forecasts to grow from €6.4 billion this year to €7.4 billion by 2028. This growth is attributed to hedging tailwinds amid a steepening yield curve. Notably, Goldman's NII projections for 2026-2028 stand 4-6% above consensus, indicating a non-consensus call on earnings power. The analysis anticipates that the third quarter of this year will represent a trough for replicating portfolio income, with sequential improvements beginning in the first half of 2026. A key catalyst on the horizon is the bank's Investor Day on November 25, where new management is expected to detail a path to higher returns, potentially by closing the 350 basis point Return on Tangible Equity (ROTE) gap with peer ING through enhanced cost efficiency and risk-weighted asset management. This strategy underpins Goldman's projection for ABN Amro's ROTE to expand from 9% this year to approximately 12.5% by 2028.

Key Decisions for Investors

• Investors should view the double-notch upgrade and above-consensus NII forecasts as a strong bullish signal, suggesting a potential re-rating of ABN Amro as its ROTE is projected to expand to 12.5% by 2028.
• The upcoming Investor Day on November 25 is a critical near-term catalyst; focus should be on new management's specific strategies for cost efficiency and RWA optimization, which are key to closing the profitability gap with peers.
• Given the thesis is heavily reliant on a steepening yield curve, investors must monitor interest rate trends, as changes could materially impact the forecasted NII growth and overall return profile.