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STOCKS NEWS EUROPE-Morgan Stanley sees mixed Q3 for UK banks

Friday, 12 Oct 2012 | 6:01 AM ET

Morgan Stanley sees Barclays and HSBC as set for encouraging results from the third quarter, rating both "overweight", while it gives Lloyds an "underweight" rating based on a more cautious outlook.

Barclays has an attractive valuation and high expected international banking revenues, with lower impairments off the back of their Africa and wholesale operations, note analysts at Morgan Stanley Research Europe.

However, Morgan Stanley is more cautious heading into Lloyds' results.

"We expect lower net interest income as loan balances shrink, with margins stable, costs to remain flat and impairments to moderate as expected, we expect negative EPS revision after the results," the Morgan Stanley analysts say in the note.

"We are "underweight" as we see consensus as too optimistic on revenue outlook and potential for capital return."

On Standard Chartered and RBS , Morgan Stanley is "equal weight", with a neutral outlook heading into results season.

Reuters messaging rm://alistair.smout.thomsonreuters.com@reuters.net

Keywords: MARKETS EUROPE STOCKSNEWS

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