Tariff jitters threaten mid-cap US banks' profits, Morgan Stanley says

Huntington Bancshares

14/03/2025 14:47

** Uncertainty from tariff increases are pressuring expectations for mid-cap U.S. banks' loan growth and provisions, potentially weighing on future profits, Morgan Stanley analysts write in a note

** Brokerage says it is bringing down its price targets on stocks in the sector by ~10%, but says the stock correction is overdone

** "Even without a recession, a slower pace of economic growth and higher level of policy uncertainty is a headwind for the group" - Morgan Stanley

** Brokerage raises its loan-loss provisions estimates for Q1, expecting banks to build buffers for a weaker macro environment

** Also reduces estimates for FY loan growth as borrowers dial back investment spend

** Banks typically thrive in stable macroeconomic environments, where predictable interest rates, steady loan demand, and low credit losses support lending, capital markets activity, and investments

** Brokerage views Prosperity Bancshares PB.N, M&T Bank MTB.N  and Huntington Bancshares HBAN.O most favorably due to idiosyncratic drivers and rates all three as 'overweight'

** PB shares are down ~8% YTD, while MTB and HBAN have declined ~9% and ~11%, respectively

 (Reporting by Manya Saini in Bengaluru)

 ((Manya.Saini@thomsonreuters.com))