11-12x P/E Back in Play

Research evidence excerpt

11-12x P/E Back in Play

Idea

June 17, 2026 03:30 AM GMT

Morgan Stanley Europe S.E., Madrid Branch+MEuropean Banks | Europe Alvaro Serrano

Equity Analyst

11-12x P/E Back in Play Alvaro.Serrano@morganstanley.comMorgan Stanley & Co. International plc+ +44 20 7425-6942

Franco Insausti, CFA

We see 2-5% earnings upgrades 2027E/28E and upon EquityFranco.Insausti@morganstanley.comAnalyst +44 20 7677-3769

confirmation of the SoH reopening, we believe the market may Giulia Aurora Miotto, CFA

now reward the sector with 11-12x P/E on the cards by year end. Equity Analyst

Giulia.Aurora.Miotto@morganstanley.com +44 20 7425-5344

We see the biggest beneficiaries of a risk on rally in corporate Noemi Peruch

exposed banks DB/SG, in addition to Top Picks SAN, UCG, BARC, EquityNoemi.Peruch@morganstanley.comAnalyst +44 20 7677-3163

and ABN. Gulnara Saitkulova

We see 2-5% earnings upgrades on the cards. Curves remain above our Gulnara.Saitkulova@morganstanley.com +44 20 7677-0313

Ned Tidmarsh

assumptions, and loan growth and fee activity is also trending better. We see loan Research Associate

growth of 4-5% back on the cards vs. 2.7% currently driven by corporate capex, and Ned.Tidmarsh@morganstanley.com +44 20 7425-0122

Almario Sulaj

our banking fee estimates of +7% for the FY are so far growing at low teens, and the

Research Associate

overall fee growth of 5% we have for the sector also has upside. Together with Almario.Sulaj@morganstanley.com +44 20 7425-2049

operating leverage and share buy-backs, we see 12% EPS CAGR 2025-28E could

Banks

reach 13-14%, Europe

Industry View Attractive

We expect Cost of Equity to come down. We believe market-implied cost of equity

remains high. Using our bottom-up framework, the sector’s market-implied cost of Exhibit 1 : We see high beta corporate lenders