Morgan Stanley : The banking sector’s earnings release was again very successful with PBT beating consensus by 10%, up 20% on last year. Revenues were +9% year on year (+13% eurozone banks), 3% better than consensus, thanks to the strength of NII which offset the fall in fees and commissions. Costs rose 3-4% and were slightly worse than expected. NII was up on average +13% year-on-year and 3% better than expected. With rates in Europe peaking in 2Q’23 and credit spreads closing, our analysts believe that NII is far from peaking. Deposit betas remain low and could fall further, while banks have been provisioning although NPLs remain very contained. Cost inflation is already priced in and our analysts have raised bpa’23 and ’24 estimates by +6% and +3% respectively. They remain positive on the sector based on NII potential as rates still have to rise 75-100bps before peaking. Top picks are Caixabank, Commerzbank, Intesa and ING.
European banks earn +9% in 2022 versus previous year and eurozone banks +13%, thanks to strong interest margins
