Deutsche Bank lifted its price targets for several Spanish lenders, citing stronger-than-expected earnings resilience and an improving growth outlook for the sector. The brokerage upgraded BBVA from hold to buy, raising its target price to €21.25 from €19.75, and Santander from hold to buy, increasing its target to €11.50 from €9.80. CaixaBank moved from sell to hold, with its target rising to €11.05 from €9.15. Banco Sabadell retained a buy rating with a target of €2.75, up from €2.55. The analyst, Alfredo Alonso, highlighted that Spanish banks continued to post higher-than-anticipated net interest income resilience in 2025, navigating a challenging rate environment through proactive liquidity management and a faster-than-expected recovery in loan growth. Strong fee income diversification and ongoing cost control reinforced the sector's profitability profile.

Deutsche Bank anticipates net interest income to regain an upward trend in 2026, underpinned by broadly stable net interest margins and strong activity. The brokerage projects returns on tangible equity at or above 20% for most institutions from 2027 onward, supported by strong asset quality and healthy capital generation. Alonso described the macro backdrop as benign, with limited risks to the sector's trajectory. This upgrade signals growing confidence in Spanish banking profitability and capital strength, potentially boosting investor sentiment and share prices.

The sector's improved outlook hinges on continued NII growth and cost discipline. Investors should watch for sustained loan growth and margin stability to validate Deutsche Bank's bullish thesis. The upgrades reflect a shift towards recognizing the sector's underlying resilience despite broader economic challenges.