Morgan Stanley's Top Pick for Bank Stocks Investment

Investing.com – Morgan Stanley has updated its list of preferred banks in the financial sector, highlighting two bank stocks that the firm considers attractive investment opportunities. The selected stocks include a large European lending institution undergoing a strategic transformation and a US regional bank with an appealing valuation.

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This latest selection by the investment bank reflects its confidence in institutions demonstrating strong capital returns, operational efficiency improvements, and clear profit growth pathways. The following are the top-ranked stocks in Morgan Stanley’s bank sector:

1. UniCredit Group (CRDI.MI)

Morgan Stanley upgraded UniCredit Group to an overweight rating on February 10, believing that the bank’s 2026-28 business plan represents a strategic transformational shift. The company expects this plan to significantly raise market consensus estimates and lead to higher valuation multiples. The new strategic goal is to achieve a 5% compound annual growth rate in loans, with growth in Italy and Germany exceeding nominal GDP growth. UniCredit expects to deliver excellent operating leverage, with absolute cost reductions by 2028 and 2030, reaching a 32% cost-to-income ratio, compared to the market consensus of 35%.

Morgan Stanley believes this strategic shift will enable UniCredit to achieve a strong 15% per-share dividend growth during 2025-28, along with a 10% growth in tangible book value per share over the same period, while maintaining an overall return of about 8%, in line with sector levels. The firm expects UniCredit’s CET1 ratio to remain around 15% during the plan period, considering an 80 basis point absorption from tax loss carryforwards, an 80% payout ratio, and approximately 4.5% growth in risk-weighted assets. Morgan Stanley estimates that by 2028, UniCredit will have €7.5 billion in excess capital, equivalent to 13% of its market capitalization, providing flexibility for acquisitions or additional capital returns.

2. Huntington Bancshares (HBAN.O)

Morgan Stanley has designated Huntington Bancshares as its top pick among US mid-sized banks, citing its low valuation and a clear path to earnings of $1.90 per share by 2027. The forecast incorporates lower revenue and expense growth than the company’s guidance.

The stock is currently trading at only 9.4 times Morgan Stanley’s 2027 EPS estimate, representing a discount relative to peers. Morgan Stanley maintains an overweight rating with a target price of $21, based on an 11x P/E multiple of 2027 earnings, implying an 18% upside.

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