Deutsche Bank Goes Bullish on Regional Lenders: Why M&T and Huntington Are Leading the Charge

Deutsche Bank’s recent upgrades of M&T Bank (NYSE: MTB) and Huntington Bancshares (NASDAQ: HBAN) to Buy ratings signal a growing confidence in regional banks’ resilience amid macroeconomic headwinds. Analyst Matt O’Conner highlighted these institutions’ strong capital positions, disciplined strategies, and attractive valuations as key drivers of their potential outperformance. Here’s why investors should take notice.

The Bullish Case for M&T Bank

Deutsche Bank’s upgrade of M&T to Buy (from Hold) comes after its shares fell 19% since February’s market highs. Despite a slight Q1 2025 earnings miss—EPS of $3.38 vs. the $3.42 estimate—the bank’s Common Equity Tier 1 (CET1) ratio of 11.5% stands out. This metric, a measure of financial strength, surpasses both regional peers (10.8%) and megabanks (9.1% when including AOCI).

The robust capital base allows M&T to aggressively deploy funds into loans, share buybacks, and potential acquisitions. In Q1 alone, the bank repurchased $662 million of its shares, underscoring management’s confidence. While Deutsche trimmed its price target to $210 (from $225), the 24.5% upside from current levels ($158.65) remains compelling.

Huntington’s Turnaround Story

Huntington’s upgrade from Hold to Buy reflects its strong Q1 execution. The bank beat EPS estimates with $0.34 (vs. $0.31), driven by a 26% YoY rise in net income to $527 million. Its $57.9 billion in liquid assets (28% of total assets) and improving credit metrics—nonperforming loans down $150 million to $1.5 billion—bolster its stability.

Analysts also praise Huntington’s deposit franchise, with average balances up 1% sequentially, and its 58.6% efficiency ratio, which outpaces many peers. Deutsche’s $17.50 price target (down from $19) still implies a 15% upside from recent trading around $15.

Why Regional Banks Are Poised to Outperform

Deutsche’s broader bullish stance on regional lenders hinges on three pillars:
1. Valuation Discounts: Regional banks trade at 10.7x P/E ratios, far below megabanks’ 13.5x.
2. Capital Flexibility: High CET1 ratios enable M&A activity and shareholder returns. M&T’s buybacks alone reduced shares outstanding by 1.5% in Q1.
3. Interest Rate Resilience: While net interest margins (NIM) face pressure, Huntington’s NIM held steady at 3.10%, and M&T’s rose 8 bps to 3.66%.

Risks and Considerations

• Earnings Volatility: Both banks saw noninterest expenses rise—M&T by $52 million, Huntington by $20 million—due to higher compensation costs.
• Economic Uncertainty: Prolonged low rates or credit deterioration could strain margins.
• Regulatory Headwinds: Stricter capital rules could limit deployment flexibility.

Conclusion: A Bullish Call Backed by Data

Deutsche Bank’s upgrades aren’t just sentiment—they’re grounded in hard numbers. M&T’s CET1 ratio (11.5%) and Huntington’s deposit growth (1% sequential) position them to capitalize on M&A opportunities and outperform peers. With 24.5% upside for M&T and 15% for Huntington, these stocks offer attractive risk-adjusted returns.

The data speaks: regional banks are undervalued and strategically agile. Investors seeking stability and growth should consider these picks as the sector navigates 2025.