Morgan Stanley continues to favour Société Générale within the cohort of French lenders, while adopting a more favourable stance on BNP Paribas following management moves to rein in costs and tighten capital policy. Crédit Agricole, although solid on fundamentals and well diversified, remains on the broker's sidelines because it lacks immediate positive triggers.
Société Générale - The bank remains Morgan Stanley's preferred pick. The broker argues Société Générale is positioned ahead of consensus on earnings and is set up to deliver consistently through a combination of buybacks and operational execution. While some market participants have pointed to an underwhelming fourth quarter and softer guidance at Ayvens, Morgan Stanley expects quarter-on-quarter stability, ongoing capital returns, and that clearer strategic targets announced at the September capital markets day will help support the equity case. The firm also views Société Générale as offering the strongest earnings growth among its domestic peers.
BNP Paribas - Morgan Stanley describes BNP Paribas as "becoming more interesting" after the bank stepped up cost actions and articulated firmer capital commitments. Management's stated goal of reducing the cost/income ratio to below 56% by 2028, together with a common equity Tier 1 ratio target above 13%, has prompted Morgan Stanley to raise its earnings forecasts and to lift its price target materially. That said, persistent litigation uncertainty linked to Sudan keeps the broker at an Equal-weight recommendation for now, despite the combination of improved profitability and a valuation that looks cheaper than many peers.
Crédit Agricole (CASA) - The broker views Crédit Agricole as fundamentally robust but lacking in catalysts that could drive near-term upside. The bank benefits from a diversified earnings mix with meaningful exposure to asset management and insurance, and it already operates at a relatively efficient cost base. Nonetheless, Morgan Stanley highlights slower expected earnings-per-share growth relative to peers, complications stemming from recent restatements, and outstanding questions about potential M&A activity in Italy as factors that constrain upside. Consequently, despite reasonable valuation and apparent excess capital, the broker remains cautious.
In sum, Morgan Stanley's positioning reflects a mix of conviction and caution across the French banking sector: clear preference for Société Générale based on earnings momentum and capital returns, an upgraded but still measured view on BNP Paribas driven by cost and capital targets, and a neutral posture on Crédit Agricole due to limited near-term catalysts.
Sector implications - The broker's views primarily affect the banking and broader financial services sector, including asset management and insurance lines where Crédit Agricole has significant exposure. Shifts in analyst estimates and price targets may influence investor flows within European bank equities.