Goldman Upgrades ABN Amro to Buy; €32.50 Target Implies ~20% Upside and 13-14% Capital Return Yield

Goldman Sachs (NYSE:GS) has moved ABN Amro Bank (BVMF:ABAM34) off the "sell" list and slapped a "buy" on it, lifting its 12‑month price target to €32.50 from €24.70. The market liked the call: shares ticked up just over 2% on Friday after closing at €27.06 on Oct. 1 - leaving roughly 20% between the close and Goldman's new target.

Goldman's upgrade is built on three pillars: stronger net interest income, tighter cost discipline, and a heftier programme of capital returns. The bank now models return on tangible equity (ROTE) climbing from 9.2% in 2025 to 11.5% in 2027 and 12.5% by 2028.

On the revenue front, Goldman expects net interest income to rise from about €6.4 billion in 2025 to roughly €7.4 billion in 2028 - a forecast that sits 4-6% above consensus. That uptick is pinned to hedging gains from a steeper yield curve and reinvesting into longer‑dated assets. Goldman also flags a neat sensitivity: a 25‑basis‑point drop in savings rates would add roughly €250 million a year - about 8% of projected 2026 net profit.

Shareholder payback is getting real. Goldman projects €8.5 billion returned over 2025-27, split into roughly €3.5 billion of dividends and €5 billion of buybacks - equal to about 37% of the bank's €22.5 billion market cap. The payout ratio is modelled near 50% and buybacks are expected to run twice a year, leading to advertised capital return yields of 13% in 2026 and 14% in 2027 - top of the European banking peer set.

Capital efficiency is a lever here. ABN Amro's CET1 ratio was 14.8% in Q2 2025; Goldman assumes a 13.5% target for 2026. Pushing CET1 down to 13% could lift ROTE by about 110 basis points. On the asset side, Goldman says the bank has been trimming risk density in corporate lending - average risk weights were 116% in 2024, down to 103% by mid‑2025. Hitting a 90% level, Goldman estimates, would free roughly €1.4 billion of capital.

Costs are the other headline. ABN Amro's cost‑to‑income ratio was 62% in 2024 versus ING (AMS:ING) at 54%. Goldman points to higher IT spend (around 12% of revenue) and external consultants (about 9%) as the main drivers. Their model assumes cuts to IT spend and a halving of external staff, lowering the cost‑to‑income ratio toward 57% by 2028 and adding as much as 140 basis points to ROTE.

Numbers updated: Goldman now sees EPS rising from €2.54 in 2025 to €3.56 in 2027. Dividend per share is forecast to climb from €1.26 in 2025 to €1.87 in 2027. Net income is forecast at €2.1 billion in 2025, €2.3 billion in 2026 and €2.6 billion in 2027.

Goldman doesn't ignore the downsides. A slowdown in the Dutch economy, slower-than-expected cost cuts, adverse moves in risk‑weighted assets, lower interest rates or a rise in savings rates could all derail the thesis.

Bottom line: the upgrade flips the narrative on ABN Amro Bank (BVMF:ABAM34) from cost‑ridden laggard to a play on NII improvement and hefty capital returns - assuming execution goes to plan. Will buybacks and tighter risk weights be enough to close the roughly 20% gap to Goldman's €32.50 target?