Morgan Stanley | Our analyst A. S. reiterates the OW on European banks as, among other things, he believes that earnings are going to be more resilient than the market is discounting. The savings rate in Europe is at 15% (the highest in the world) and should be able to be monetised in a positive rate environment into deposits and asset management products, rather than the bond market.
He estimates for 2024-26: 1) deposit growth of 0-4% depending on the region, which should support NII even if loan growth does not pick up and 2) 9-10% growth in WM and AM fees supported by net new money growth of 4% per annum. To that we add the recovery in capital markets (DCM/ECM & M&A) which we see growing by 13%. In aggregate, it estimates a 6% CAGR 2023-26 growth in fees and commissions, and on average these figures are 3-4% higher than the consensus in 2025 and above all the gap is greater in UBS, ISP and KBC. Although there is still some upside in the short term on NI figures, they are more positive on banks that can benefit from Wealth/AM and market fees.
The sector trades at 7x P/E’24 with an average EPS growth of 5% CAGR 2024-26. Today they replace Caixabank (OW) with Intesa (OW) as a top pick.In any case, it continues to reiterate the overweight in Caixabank, as it continues to see upside in its numbers, driven in the short term by the potential upside on its NII mid-single-digit growth guidance (MSe is 3% ahead of consensus for NII 2025). However, it is more bullish on Intesa, as it believes it offers similar NII dynamics, and sees a 4% upside vs. consensus on fees (in line with consensus for Caixabank). P.O. of €6.
