Morgan Stanley downgraded Intesa SanPaolo to an "equal-weight" recommendation from "overweight" and lowered its price objective to €6.60 from €6.80, citing a restrained growth outlook and an absence of obvious short-term catalysts.
Intesa SanPaolo shares closed at €5.81 on May 8, leaving roughly 13.5% of upside to Morgan Stanley's revised target. The bank's scenario analysis includes a bull case valued at €7.60 and a bear case at €5.10.
Analyst rationale
Analyst Noemi Peruch said the firm does not view ISP as trading on demanding multiples but considers the stock burdened by limited growth and a lack of forthcoming catalysts that are likely to weigh on performance.
On the earnings front, Morgan Stanley slightly increased its 2026 EPS forecast to €0.56 and its 2027 EPS forecast to €0.63, each up by about 1%, attributing the revisions mainly to higher trading revenues and, to a lesser extent, increased net interest income. By contrast, the brokerage trimmed its adjusted 2028 EPS estimate by approximately 1% to €0.68, citing the impact of higher AT1 coupon costs.
Macro and rate assumptions
The firm's interest-rate path assumptions include a 25 basis-point hike in June 2026, another 25 basis-point increase in September 2026, followed by rate reductions in June and September 2027 that bring rates to 2%.
Morgan Stanley projects net interest income (NII) at €15.22 billion in 2026, €16.04 billion in 2027 and €16.30 billion in 2028. It also notes that, with the current forward rate curve, the 2028-29 NII target could be higher by around €500 million, which would imply roughly a 1% upgrade to 2029 Visible Alpha consensus.
Revenue and profitability projections
Fee and commission income are forecast at €10.37 billion for 2026, €10.80 billion for 2027 and €11.25 billion for 2028. Operating profit is projected at €17.09 billion for 2026, while the cost-to-income ratio is expected to reach 37% by 2028, consistent with the company’s targets.
Morgan Stanley's net profit estimates sit above Visible Alpha consensus by 1.5% for 2026, 3.4% for 2027 and 2.6% for 2028.
Valuation and shareholder returns
Under Morgan Stanley’s calculations, the stock trades at 10.3 times projected 2026 earnings and 9.2 times projected 2027 earnings. Return on average tangible equity is forecast at 21.5% in 2026, 23.4% in 2027 and 24.2% in 2028.
Dividend yields are anticipated to be 7.6% in 2026, rising to 8.5% in 2027 and 9.1% in 2028. The price target is derived from a sum-of-the-parts/Gordon growth framework that assumes a 12% cost of equity and a 1% long-term growth rate.
Implications
- The downgrade reflects Morgan Stanley’s view that, absent new catalysts, valuation alone does not justify an overweight stance.
- Adjusted near-term earnings show modest upward revisions for 2026-27 but a slight reduction for 2028 driven by funding costs tied to AT1 instruments.
- Projected NII and fee income growth underpin operating profit and dividend expectations across the 2026-2028 timeframe.
These projections and the revised target provide investors with Morgan Stanley's updated framework for assessing Intesa SanPaolo's earnings trajectory, capital returns and sensitivity to interest-rate movements.