Morgan Stanley is shifting its preference for KBC shares to ING, because the Dutch bank is more attractively valued and offers more opportunities for surprises with regard to loan loss provisions, costs and interest income.
The advice for ING is increased to Overweight with a target price of 10.50 euros. For KBC, the advice actually drops to Equal weighted with a target price of 67.00 euros.
For ING, Morgan Stanley’s earnings forecasts for the next four years will increase by 15 percent. This is partly due to significantly lower than expected provisions for non-performing loans, the American investment bank is now counting on 30 basis points of the loan book instead of 45 points.
Other factors are cost control and loan growth, lower savings interest rates and growing fee income. Finally, Morgan Stanley mentions the firm intention to distribute capital and possible divestments.
KBC has the best business model among banks in the Benelux, as well as the best potential for cross-selling, but is less attractively valued, says Morgan Stanley, with upward potential of around 15 percent.
Finally, ABN AMRO has a long road to recovery, say the analysts.