MS cautious on euro area retail banks, sees stronger EPS growth in UK
** Morgan Stanley has a neutral view on the European banking sector, saying payout yields support valuations but rising likelihood of rates undershooting poses a downside risk to consensus earnings
** It favours fee-heavy models, wealth, and the UK where it expects more than 10% higher EPS growth in 2024-2027 vs euro area retail banks
** Euro weakness and potential tariffs could drive a short-term inflation upside, but anaemic economy growth is expected to weigh more, it says
** "Our economists expect an ECB rate cut to 1.25% by end of 2025E and 1% throughout 2026E," it adds
** It downgrades Caixabank CABK.MC, seeing a pause in performance, and ING INGA.AS based on its well-below consensus estimates for 2026-2027
** It upgrades Nordea NDAFI.HE and Santander SAN.MC on more resilient regional footprint and improved capital generation outlook
** It raises 3i III.L, saying positive changes in key assets could surpass company and market predictions, and Handelsbanken SHBa.ST on overdone underperformance
** Its top picks are Barclays BARC.L, Nordea, Santander and KBC KBC.BR, and BCP BCP.LS among mid-caps
COMPANY | RATING | OLD RATING | PT | OLD PT |
|---|---|---|---|---|
Nordea | overweight | equal-weight | EUR 14.2 | EUR 13.8 |
Santander | overweight | equal-weight | EUR 5.9 | EUR 5.6 |
Handelsbanken | equal-weight | underweight | SEK 127 | SEK 122 |
Caixabank | equal-weight | overweight | EUR 6.25 | EUR 5.60 |
ING | equal-weight | overweight | EUR 17.5 | EUR 19 |
3i | overweight | equal-weight | 4,069 p | 3,192 p |
Reporting by Marta Serafinko
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