Morgan Stanley has refreshed its outlook on bank equities and singled out two names it regards as particularly compelling for investors: UniCredit S.p.A. and Huntington Bancshares. The selections reflect the firm’s focus on institutions that combine capital return potential, operational efficiency gains and transparent trajectories for earnings improvement.
UniCredit S.p.A. (CRDI.MI)
Morgan Stanley raised UniCredit to Overweight on February 10, pointing to the lender’s 2026-28 business plan as a meaningful strategic reset. The investment bank expects the plan to catalyze consensus upgrades and lift the bank’s valuation multiple.
The plan sets a 5% compound annual growth rate for loans, with growth in Italy and Germany expected to outpace nominal gross domestic product. Morgan Stanley highlighted projected operating leverage, noting forecasted absolute cost reductions by 2028 and 2030. The bank expects UniCredit to reach a 32% cost-to-income ratio, below the 35% in consensus estimates.
On shareholder returns, Morgan Stanley forecasts strong dividend per share growth of 15% annually from 2025 through 2028, and tangible book value per share expansion of 10% over the same period. The firm anticipates an overall dividend yield around 8%, in line with the sector.
Capital metrics are also central to Morgan Stanley’s view. The firm projects UniCredit’s common equity tier 1 ratio to remain near 15% during the plan, factoring in 80 basis points from tax loss carry forward absorption, an 80% payout ratio and roughly 4.5% growth in risk-weighted assets. Based on these assumptions, Morgan Stanley estimates UniCredit could hold approximately 7.5 billion euros of excess capital by 2028 - equivalent to about 13% of the bank’s market capitalization - which it says would provide flexibility for mergers and acquisitions or additional capital returns.
Huntington Bancshares (HBAN.O)
Among U.S. midcap banks, Morgan Stanley identified Huntington Bancshares as its preferred pick, driven by what it describes as an attractive valuation and a defined path to earnings improvement. The firm’s forecasts point to $1.90 in earnings per share by 2027, with estimates that incorporate lower revenue growth and lower expense growth than the company’s own guidance.
Morgan Stanley’s model values Huntington at 9.4 times its 2027 EPS estimate, a multiple the firm considers a discount to peers. The research house retained an Overweight rating and established a $21 price target by applying an 11 times price-to-earnings multiple to its 2027 earnings forecast, an approach that implies roughly 18% upside from current levels according to the firm.
Both picks reflect Morgan Stanley’s emphasis on banks with demonstrable capital return capacity and identifiable levers for improving operational efficiency and earnings. UniCredit’s multi-year plan and anticipated excess capital position offer potential for re-rating, while Huntington’s low multiple and forecasted EPS trajectory underpin the midcap pick.
Key takeaways and context
- UniCredit’s 2026-28 plan is central to Morgan Stanley’s upgrade, with targets for loan growth, cost reduction and improved profitability metrics.
- Huntington is highlighted for its valuation gap to peers and a projected path to $1.90 in EPS by 2027, driving an Overweight rating and $21 price target.
- The recommendations prioritize capital returns, operational leverage and earnings clarity within the banking sector.