BUZZ-MS sees upside for French, Benelux banks despite rate cuts
With expected rate cuts in 2024, Morgan Stanley flags pressures on French and Benelux banks' net interest income (NII), but sees upside from capital yields and asset quality
"With the market pricing in a last hike by the ECB in Q4 and rate cuts from end 2024, investors are asking whether we are past the peak in NII and when it will start to fall," - MS
NII "has not peaked in Benelux and will recover in France," in 2024, it says
MS remains "cautiously optimistic" on the banks' asset quality and expects improvement from "high management overlays to start with and a relatively benign macro backdrop,"
It upgrades Societe Generale to "overweight" from "equal-weight," citing "inexpensive" valuation, and restructuring potential which could unlock capital
Credit Agricole ("underweight") has lower capital distribution versus sector, while its costs may increase in 2024, the brokerage notes
BNP Paribas ("Equal-weight") is "starting to screen as attractive again," due to a buy-back on the way and potential deployment of excess capital, but visibility on revenue is low - MS
It praises ING's ("overweight") "clear messaging" on capital distribution, expecting the bank to announce a "step-up" in Q3
ABN Amro's stock is "cheap", although upside is "long dated", while Belgium's KBC ("equal-weight") has "excellent operating performance," but has few catalysts before Q1 2024 - MS
SocGen shares rise about 2%, Credit Agricole up less than 1%, ING and BNP +1% roughly, and ABN roughly flat