MS cautious on euro area retail banks, sees stronger EPS growth in UK

Nordea Bank Abp

25/11/2024 11:14

** 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)
 ((mailto:Marta.Serafinko@thomsonreuters.com; +48 58 769 66
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