Investing.com — Morgan Stanley Research raised Spanish bank CaixaBank to “overweight” from “equal-weight” and named it a top pick, saying weaker interest income at Spanish banks reflects a lag in loan re-pricing rather than tougher competition for deposits.
The broker lifted its price target to €14 from €13.80, saying lower capital consumption drove the increase while its 2028 earnings forecast is unchanged.
The stock is down 15% from its peak, which Morgan Stanley linked to a sell-off in sovereign bonds, worries over deposit competition and earnings risk.
With the short-term risk to third-quarter consensus passed, it sees the decline as a chance to buy one of Europe’s top franchises.
CaixaBank’s third-quarter attributable profit beat analyst expectations by 7.5%, rising 21.7% from a year earlier to €1.76 billion, while Morgan Stanley expects a strong recovery in net interest income from 2027 as loan repricing and maturing swaps support growth.
Net interest income was €2.80 billion, 0.8% below consensus of €2.82 billion, while banking fees of €490 million missed expectations by 1.2%.
Morgan Stanley attributed lower third-quarter deposit volumes to interest rate increases, as seen in 2023, and expects growth to recover to 3%-4% over the coming months.
Combined with the maturity of €13.3 billion in negative-yielding swaps in the first quarter of 2027, this should drive the strongest net interest income growth in the sector, at 17% in 2027 and 9% in 2028, it said.
The broker trimmed its net interest income forecasts to reflect weaker deposit volumes in the quarter but still expects loans and deposits to grow by an average of 4%-5%, with its 2027 and 2028 estimates remaining above consensus.
Spain’s average deposit yield rose 7.5 basis points from the previous quarter, compared with an approximately 28-basis-point increase in Euribor, which Morgan Stanley described as normal rate pass-through.
Top one-year term deposit offers in Spain stand at around 3%, in line with the interest rate outlook, it said.
CaixaBank’s liquidity coverage ratio of 193%, among the highest in Europe, also leaves it well positioned to avoid the funding pressures seen in the UK, Morgan Stanley said.